Shri Rajeshbhai D.Prajapati, Baroda V. The Dy.CIT.,Circle-2(2), Baroda

ITA 2703/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76882 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 17-09-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: R K DHANISTA
• Keywords: Capital asset; Business income; Additional evidence; Corroborative evidences
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AH MEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI, A.M.) I.T. A. NOS. 2657 & 2702 /AHD/2010 (ASSESSMENT YEAR: 2007-08) THE DCIT, CIRCLE-2(2), BARODA V/S SHRI RAMESH C PRAJAPATI SATYANARYAN BHAVAN, REFINERY ROAD, GORWA BARODA PAN NO. ACSPP 2112L (APPELLANT) (RESPONDENT) SHRI RAMESH C PRAJAPATI SATYANARYAN BHAVAN, REFINERY ROAD, GORWA BARODA PAN NO. ACSPP 2112L V/S THE DCIT, CIRCLE-2(2), BARODA (APPELLANT) (RESPONDENT) ITA NOS. 2658 & 2704/AHD/2010 (ASSESSMENT YEAR: 2007-08) THE ACIT, CIRCLE-2(1), BARODA V/S SHRI HASHMUKHBHAI R PRAJAPATI, SATYANARYAN BHAVAN, REFINERY ROAD, GORWA BARODA PAN NO. ACPPP2632N (APPELLANT) (RESPONDENT) SHRI HASHMUKHBHAI R PRAJAPATI, SATYANARYAN BHAVAN, REFINERY ROAD, GORWA BARODA PAN NO. ACPPP2632N V/S THE ACIT, CIRCLE-2(1), BARODA (APPELLANT) (RESPONDENT) ITA NOS. 2659 & 2703/AHD/2010 (ASSESSMENT YEAR: 2007-08) ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 2 THE DCIT, CIRCLE-2(2), BARODA V/S SHRI RAJESHBHAI D PRAJAPATI, SATYANARYAN BHAVAN, REFINERY ROAD, GORWA BARODA PAN NO. AGRPP 0517E (APPELLANT) (RESPONDENT) SHRI RAJESHBHAI D PRAJAPATI, SATYANARYAN BHAVAN, REFINERY ROAD, GORWA BARODA PAN NO. AGRPP 0517E V/S THE DCIT, CIRCLE-2(2), BARODA (APPELLANT) (RESPONDENT) ITA NO. 238/AHD/2011 ASSESSMENT YEAR: 2007 -08) SHRI RAMANBHAI C PRAJAPATI, SATYANARYAN BHAVAN, REFINERY ROAD, GORWA BARODA PAN NO. ACSPP 2113M V/S THE DCIT, CIRCLE-2(2), BARODA (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.K. DHANISTA, SR. D. R. RESPONDENT BY : SHRI TEJ SHAH ( )/ ORDER DATE OF HEARING : 13-05-201 4 DATE OF PRONOUNCEMENT : 11-07-2014 PER BENCH. 1. THESE 7 APPEALS ARE AGAINST THE ORDER OF CIT(A)- II, BARODA FOR A.Y. 2007-08. 2. BEFORE US AT THE OUTSET, BOTH THE PARTIES SUBMIT TED THAT THOUGH THE APPEALS ARE OF 4 DIFFERENT ASSESSEES, BUT ALL THE ASSESSEES ARE FA MILY MEMBERS AND THE FACTS IN ALL THE 7 APPEALS (3 APPEALS FILED BY REVENUE AND 4 FILED BY ASSESSEE) ARE IDENTICAL EXCEPT FOR THE AMOUNTS AND THEREFORE THEY HAVE COMMON SUBMISSIONS TO MAKE WITH RESPECT TO THE COMMON GROUNDS AND THE SUB MISSION MADE BY THEM IN THE CASE OF ONE ASSESSEE WOULD BE EQUALLY APPLICABL E TO THE OTHER ASSESSEES AND THEREFORE ALL THE APPEALS CAN BE HEARD TOGETHER . WE THEREFORE PROCEED TO ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 3 DISPOSE ALL THE APPEALS TOGETHER BY WAY OF CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. 3. WE PROCEED WITH THE FACTS IN THE CASE OF SHRI R AMESH C. PRAJAPATI. (ITA NO. 2657 & 2702/AHD/2010). 4. ASSESSEE IS AN INDIVIDUAL STATED TO BE HAVING IN COME FROM BUSINESS, OTHER SOURCES, AGRICULTURE INCOME AND CAPITAL GAINS. ASS ESSEE FILED HIS RETURN OF INCOME FOR A.Y. 07-08 ON 31.10.2007 DECLARING TOTAL INCOME AT RS. 19,86,268/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER T HE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 29.12.2009 AN D THE TOTAL INCOME WAS ASSESSED AT RS. 1,72,16,900/-. AGGRIEVED BY THE OR DER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 2 4.06.2010 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF C IT(A), THE REVENUE AND ASSESSEE BOTH ARE NOW IN APPEAL BEFORE US. THE GROU NDS RAISED BY REVENUE IN ITA NO. 2657/AHD/2010 READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ID. CIT(APPEALS) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE AGRICULTURAL INC OME AT RS.12,12,220/- AS CLAIMED BY THE ASSESSEE AS AGAINST RESTRICTING THE SAME AT RS.4,62 ,220/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE HIS CLAIM W ITH SUPPORTING EVIDENCE TO PROVE THAT HE HAD REALLY CARRIED OUT ANY AGRICULTURAL ACTIVITIES AND THAT THE BILLS AND VOUCHERS PRODUCED IN SUPPORT OF HIS CLAIM WERE FICTITIOUS AS ELABORATELY DISCUSSED IN THE ASSESSMENT ORDER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ID.CIT (APPEALS) HAS ERRED IN RESTRICTING THE ADDITION MADE ON ACCOUNT OF DISALLO WANCE OF CLAIM OF LONG TERM CAPITAL GAIN AND BY TREATING THE SALE CONSIDERATION OF LAND AS B USINESS INCOME OF RS.1,42,97,628/- TO RS,32,55,053/-. THE ID.CIT (APPEALS) ERRED IN NOT A PPRECIATING THE FACT THAT THE MODUS OPERANDI OF THE ASSESSEE'S BUSINESS IS THAT THE ASS ESSEE PURCHASES AGRICULTURAL LAND AND CONVERTS IT IN NON-AGRICULTURAL BY LEGAL FORMALITIE S AND SELL THE LAND WITH DEVELOPMENT RIGHT - ADVENTURE IN THE NATURE OF THE TRADE. THUS, THE ASS ESSEE IS NOT AN INVESTOR IN LAND BUT A TRADER AND THE LAND IN THE POSSESSION OF THE ASSESSEE IS N OT HIS ASSET, BUT MERE STOCK IN TRADE AND THE CONSIDERATION OUT OF SALE OF LAND IN THE CASE O F THE ASSESSEE IS BUSINESS INCOME IN VIEW OF THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE C ASE OF RAJA J.RAMESHWAR RAO VS CIT, 42 ITR 179 AND THE JURISDICTIONAL GUJARAT HIGH COURT IN THE CA SE OF HEMACHAND HIRACHAND SHAH VS CIT, 206 ITR 55. THE GROUND RAISED BY THE ASSESSEE IN ITA NO. 2702/A HD/2010 READS AS UNDER:- 1.THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-LL, BARODA HAS ERRED IN LAW AND IN FACTS IN HOLDING THAT THE PURCHASE OF LAND OF REVENUE SURVEY NO. 287 WAS THE PROPERTY OF THE PARTNERSHIP FIRM M/S. SATYANARAYAN TRADERS AND WAS REFLECTED IN THE ACCOU NTS AND BALANCE SHEET OF THE PARTNERSHIP FIRM. 2. THE ID. CIT(A) FURTHER ERRED IN LAW AND IN FACTS IN HOLDING THAT BY RECASTING THE ACCOUNTS / BALANC E SHEET OF M/S. SATYANARAYAN TRADERS, THE INVESTMENT IN THE PURCHASE OF LAND AT REVENUE SURVEY NO. 287 ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 4 IS TRANSFERRED TO THE ACCOUNT OF THE APPELLANT AND, THEREFORE, EVEN THOUGH THE SAID LAND WAS PURCHASED IN THE YEAR 1999, WAS TO BE TREATED AS A BUSINESS A SSET AND THE PROFIT ON ITS SALE AMOUNTING TO RS. 10,95,741/- WAS TO BE TAXED AS BUSINESS INCOME AS A GAINST CAPITAL GAINS DISCLOSED BY THE APPELLANT. THE TAXATION OF THE AMOUNT OF RS. 10,95,741/- BEING THE INCOME FROM SALE OF A CAPITAL ASSET MAY PLEASE BE DIRECTED TO BE ASSESSED AS INCOME FROM SALE OF C APITAL ASSET AS CAPITAL GAINS INSTEAD OF BUSINESS INCOME. 3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-LL, BARODA HAS ERRED IN LAW AND IN FACTS IN HOLDING THAT THE PURCHASE OF LAND OF REVENUE SURVEY NO. 485 WAS THE PROPERTY OF THE PARTNERSHIP FIRM M/S. SATYANARAYAN TRADERS AND WAS REFLECTED IN THE ACCOU NTS AND BALANCE SHEET OF THE PARTNERSHIP FIRM. 4. THE ID. CIT(A) FURTHER ERRED IN LAW AND IN FACTS IN HOLDING THAT BY RECASTING THE ACCOUNTS / BALANC E SHEET OF M/S. SATYANARAYAN TRADERS, THE INVESTMENT IN THE PURCHASE OF LAND AT REVENUE SURVEY NO. 485 IS TRANSFERRED TO THE ACCOUNT OF THE APPELLANT AND, THEREFORE, EVEN THOUGH THE SAID LAND WAS PURCHASED IN THE YEAR 1999, WAS TO BE TREATED AS A BUSINESS A SSET AND THE PROFIT ON ITS SALE AMOUNTING TO RS. 21,59,312/- WAS TO BE TAXED AS BUSINESS INCOME AS A GAINST CAPITAL GAINS DISCLOSED BY THE APPELLANT. THE TAXATION OF THE AMOUNT OF RS. 21,59,312/- BEING THE INCOME FROM SALE OF A CAPITAL ASSET MAY PLEASE BE DIRECTED TO BE ASSESSED AS INCOME FROM SALE OF C APITAL ASSET AS CAPITAL GAINS INSTEAD OF BUSINESS INCOME. 5. THE ID. CIT(A) FURTHER ERRED IN LAW AND IN FACTS AND IN CONTRADICTION TO HER OWN FINDING OF DIRECTI NG THE TAXATION OF CAPITAL GAINS OF RS. 32,55,053/- (R S. 10,95,741/- + RS. 21,59,312/-) FROM THE SALE OF LAND AT SURVEY NOS. 287 AND 485 AS INCOME OF THE AP PELLANT DESPITE HOLDING THAT THE LAND AT REVENUE SURVEY NOS. 287 AND 485 WERE PURCHASED AND REFLECTE D IN THE ACCOUNTS OF M/S. SATYANARAYAN TRADERS, PARTNERSHIP FIRM. EVEN FROM THIS COUNT, THE TAXATIO N OF THE AMOUNT OF RS. 32,55,053/- IN THE CASE OF T HE APPELLANT DESERVES DELETION. 1 ST GROUND OF THE REVENUES APPEAL IS WITH RESPECT TO RESTRICTION OF THE ADDITION MADE TO AGRICULTURE INCOME: 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAD DECLARED AGRICULTURAL INCOME OF RS. 12,12,220/-. AS SESSEE WAS ASKED TO FURNISH THE DETAILS OF THE AGRICULTURE INCOME. ON THE BASIS OF THE COPIES OF THE BILLS OF PURCHASERS SUBMITTED BY THE ASSESSEE, A.O NOTICED T HAT IN THE COPIES OF BILLS OF M/S. PARSHWA TRADING AND HARSH CORPORATION, THE ADD RESS OF THE PURCHASER WAS NOT MENTIONED. A.O ALSO NOTICED THAT ASSESSEE HAS STATED TO HAVE SOLD DRUMSTICKS BUT ACCORDING TO AO, ASSESSEE HAD FAILED TO SUBSTANTIATE HIS CLAIM OF PROVING THAT HE WAS HAVING DRUMSTICK TREES AND THE CROP WAS SOLD. A.O ALSO NOTED THAT ASSESSEE HAD PURCHASED THE BILLS OF DIFF ERENT DATES AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF REL ATIVES OF THE ASSESSEE, HE NOTICED THAT AT THE NEARER DATE BILLS WITH SIMILAR SAME NUMBERS WERE PRODUCED BY THE RELATIVES. A.O THEREFORE HELD THAT ASSESSEE WAS COPYING THE BILLS TO PROVE HIS AGRICULTURE INCOME. A.O LISTED THE INSTANCES OF SAM E BILL NUMBERS AT PAGE 3 TO 4 OF THE ASSESSMENT ORDER. A.O THEREFORE CONCLUDED T HAT ASSESSEE HAS ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 5 ACCOMMODATED BILLS TO PROVE HIS AGRICULTURE INCOME BUT SINCE THE ASSESSEE WAS AGRICULTURIST, OUT OF THE NET AGRICULTURAL INCOME O F 12,12,220/- SHOWN BY ASSESSEE, A.O TREATED RS. 7,50,000/- AS BUSINESS I NCOME OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER:- 2.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHO RIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFICER. THE APPELLANT IS AN AGRICULTURIS T WHICH IS ACCEPTED BY THE ASSESSING OFFICER. IN THE EARLIER YEARS DEPARTMENT HAS ACCEPTED INCOME FR OM AGRICULTURE RANGING FROM RS.11,47,486/- TO RS.16,01,261/-. IN THE CURRENT YEAR THE CLAIM OF THE APPELLANT OF RS.12,12,220/- APPEARS REASONABLE, KEEPING IN VIEW THE AGRICULTURAL LAND S EEN IN THE BALANCE SHEET AMOUNTING TO RS.1,25,26,939/-. THE APPELLANT HAS FILED A COPY OF THE ACCOUNTS FROM THE PURCHASER, THEIR CONFIRMATION AND RECEIPTS FROM APMC, KARJAN. NO DIS CREPANCY IN ANY DOCUMENT IS NOTED. HENCE THE ASSESSING OFFICER'S CONCLUSION OF RS.7,50,000/- BEING BUSINESS INCOME IS WITHOUT ANY BASE AND IS DIRECTED TO BE DELETED. 6. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NO W IN APPEAL BEFORE US. 7. BEFORE US, THE LD. D.R TOOK US THROUGH THE FINDI NGS AND OBSERVATION OF A.O AND REITERATED THAT IN THE COPIES OF THE BILLS OF PURCH ASES SUBMITTED BY THE ASSESSEE, THERE WAS NO ADDRESS MENTIONED AND AS ILLUSTRATION POINTED TO PAGE 72 TO PAGE 84 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT CIT (A) HAS GRANTED RELIEF TO THE ASSESSEE MERELY ON THE BASIS OF THE FACT THAT IN TH E PAST, THE DEPARTMENT HAD ACCEPTED THE ASSESSEE TO BE HAVING INCOME FROM AGRI CULTURE AND THEREFORE THE CLAIM OF THE ASSESSEE WAS CONSIDERED TO BE REASONAB LE. HE SUBMITTED THAT THE CONCLUSION OF THE LD CIT(A) WAS WITHOUT ANY BASIS A ND NOT SUPPORTED BY MATERIAL ON RECORD. THE LD. D.R. FURTHER SUBMITTED THAT ASSE SSEE HAS NOT PLACED ON RECORD HIS LAND HOLDING, THE AREA UNDER CULTIVATION, THE N ATURE OF CROPS GROWN ETC TO SUBSTANTIATE HIS CLAIM OF EARNING INCOME FROM AGRIC ULTURE ACTIVITIES. HE THUS SUPPORTED THE ORDER OF A.O. THE LD. A.R. ON THE OTH ER HAND SUBMITTED THAT SUBMISSION OF LD. D.R. THAT NO ADDRESS WERE MENTION ED IN THE BILLS OF PURCHASERS IS FACTUALLY INCORRECT AS THE BILLS DO HAVE THEIR A DDRESSES AND FOR WHICH HE POINTED TO COPIES OF BILLS PLACED PAGE NO. 86 ONWARDS IN T HE PAPER BOOK. HE FURTHER SUBMITTED THAT AGRICULTURE PRODUCE WAS SOLD TO APMC AND THE COPIES OF THE WEIGHT OF THE PRODUCE SOLD ARE ALSO PLACED ON PAGES 76 TO 86 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT IN THE CASE OF AGRICULTUR E PRODUCE GENERALLY THE ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 6 PREVALENT SYSTEM IS THAT BILLS ARE PREPARED BY THE PURCHASERS AND NOT THE SELLERS AND IN THE PRESENT CASE THE PURCHASERS WAS HAVING T HE SYSTEM OF PREPARING THE BILLS STARTING FROM SR. NO. 1 ON EACH DAY. HE FURT HER SUBMITTED THAT AGRICULTURE INCOME HAS BEEN ACCEPTED IN THE CASE OF ASSESSEE IN EARLIER YEARS AND NO BASIS OR REASONS HAS BEEN GIVEN BY THE A.O FOR TREATING P ART OF THE AGRICULTURAL INCOME SHOWN BY THE ASSESSEE AS BUSINESS INCOME. IN THE RE JOINDER, LD. D.R. WITH RESPECT TO THE CLAIM OF THE ASSESSEE THAT THE BILLS OF PURCHASERS CONTAINED THEIR ADDRESSES SUBMITTED THAT THOUGH THE A.O IN THE ORDE R HAD CLEARLY NOTED THAT IN NONE OF THE BILLS OF PURCHASERS THE ADDRESSES WAS M ENTIONED BUT HOWEVER IN THE COPIES OF BILLS SUBMITTED IN THE PAPER BOOK BEFORE TRIBUNAL, THE BILLS HAVE THE RUBBER STAMP OF THE ADDRESSES WHICH ACCORDING TO TH E LD DR MEANS THAT THE RUBBER STAMPS OF ADDRESSES WERE FIXED ON THE BILLS LATER ON. HE FURTHER SUBMITTED THAT ASSESSEE HAS NOT PROVED THE PRODUCTION OF CROP S AND THEREFORE THE A.O WAS FULLY JUSTIFIED IN MAKING THE ADDITION. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE THE CONTROVERSY IS THAT ASSESSEE HAS S HOWN INCOME OF RS 12,12,220/- BEING INCOME FROM AGRICULTURE ACTIVITIE S BUT A.O HAS CONSIDERED INCOME OF RS 7,50,000 TO BE AS BUSINESS INCOME. WE FIND THAT IT IS THE ASSESSEES CONTENTION THAT HE HAS STATED TO HAVE EA RNED AGRICULTURE INCOME FROM THE CROP PRODUCED/GROWN BY IT BUT THE SUBMISSION OF THE ASSESSEE OF HAVING EARNED AGRICULTURE INCOME WAS NOT ACCEPTED BY THE A .O. WE FIND THAT NO BASIS HAS BEEN SPELT OUT BY THE A.O TO ARRIVE AT THE CONC LUSION THAT OUT OF THE TOTAL INCOME DECLARED BY ASSESSEE, PART OF THE INCOME WAS BUSINESS INCOME. WE ALSO FIND THAT NO ENQUIRY WAS MADE BY THE A.O EITHER BY HIMSELF OR THROUGH THE INSPECTORS TO VERIFY AND EXAMINE THE LAND HOLDING O F THE ASSESSEE, THE NATURE OF CROPS CULTIVATED ON THE LAND, WHETHER THE LAND WAS IRRIGATED OR WHAT WERE THE FACILITIES AVAILABLE FOR IRRIGATING THE LAND, THE Y IELD OF THE LAND DURING THE RELEVANT PERIOD. WE ALSO FIND THAT NO ENQUIRY WITH SURPANCH OR PATWARI OR ANY OTHER REVENUE AUTHORITY WAS MADE EITHER BY A.O OR CIT(A) NOR THE REVENUE RECORDS WERE CALLED FOR TO ASCERTAIN YIELD OF CROPS AND THE FACTUAL POSITION. WE FIND THAT LD. ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 7 CIT(A) HAS CONSIDERED THE CLAIM OF ASSESSEE OF HAVI NG AGRICULTURE INCOME IN VIEW OF THE AGRICULTURAL LAND SHOWN AT RS. 1.25 CRO RE IN THE BALANCE SHEET. DURING THE COURSE OF HEARING, LD. A.R. WAS ASKED SPECIFIC QUESTION ABOUT THE TOTAL LAND HOLDING OF THE ASSESSEE, TYPE OF CROPS GROWN AND WH AT WERE THE IRRIGATION FACILITIES AVAILABLE TO WHICH NEITHER THE LD. A.R. OR LD. D.R. COULD FURNISH ANY REPLY. WE ARE THEREFORE OF THE VIEW THAT THE DETAILS LIKE THE LAND HOLDING UNDER AGRICULTURE, NATURE OF IRRIGATION FACILITIES ON THE LAND, THE CROPS GROWN ON THE LAND IN THE RELEVANT PERIOD, RECORD OF CROPS GROWN IN TH E REVENUE RECORDS NEEDS TO BE VERIFIED AND THEREFORE THE MATTER IS RESTORED TO TH E FILE OF A.O FOR HIM TO EXAMINE THE AFORESAID FACTS AND THEREAFTER DECIDE THE ISSUE AS PER LAW. NEEDLESS TO STATE THAT AO SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. WE ALSO DIRECT THE ASSESSEE TO CO-OPERATE BY PROMPTLY FURNI SHING THE NECESSARY DETAILS CALLED FOR BY THE AO TO DECIDE THE ISSUE. ASSESSEE IS ALSO FREE TO PRODUCE ADDITIONAL EVIDENCE, IF ANY, IN SUPPORT OF HIS CONT ENTIONS . IN THE RESULT, THIS GROUND OF REVENUE IS ALLOWED FOR STATISTICAL PURPOS ES. 2 ND GROUND IS WITH RESPECT TO RESTRICTING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF LONG TERM CAPITAL GAIN:- 9. THIS GROUND OF REVENUE IS INTERCONNECTED WITH TH E GROUNDS RAISED BY ASSESSEE AND THEREFORE THE GROUND OF REVENUE AND ASSESSEE AR E CONSIDERED TOGETHER. 10. A.O NOTICED THAT DURING THE YEAR, ASSESSEE HAD SOLD 3 PIECES OF LAND NAMELY LAND BEARING REVENUE SURVEY NO. 91, REVENUE SURVEY NO. 287 AND REVENUE SURVEY NO. 485 AND THE PROFIT EARNED ON THE SALE OF THE AFORESAID LAND WAS TREATED AS LONG TERM CAPITAL GAIN BY THE ASSESSEE. A.O NOTICED THAT LAND BEARING SURVEY NO. 91 WAS SOLD FOR RS. 1,27,83,334/- TO JAN PRIYA TRUST OF DELHI. HE ALSO NOTICED THAT ASSESSEE HAD ACQUIRED VARIOUS RIGHTS L IKE N.A ORDER FROM COLLECTOR VADODARA, DEVELOPMENT PERMISSION FROM VADODARA MUNI CIPAL CORPORATION, PERMISSION FROM AIRPORT AUTHORITY, ZONING CERTIFICA TE FROM VADODARA URBAN ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 8 DEVELOPMENT AUTHORITY. HE ALSO NOTICED THAT LAY OU T PLAN WAS APPROVED BY THE AUTHORITIES, THE LAND WAS DEVELOPED AND WAS DIVIDED INTO 206 PLOTS. IN CASE OF LAND AT REVENUE SURVEY NO. 287. A.O NOTICED THAT TH E LAND WAS JOINTLY PURCHASED WITH 4 OTHER PERSONS AND WAS SOLD TO ANJANI ENTERPR ISES AND THE ASSESSEES SHARE IN TRANSACTION WAS 11,73,276/-. WITH RESPECT TO LAND AT REVENUE SURVEY NO. 485, A.O NOTED THAT THE LAND WAS SOLD TO RAJESH WARI DEVELOPERS. HE ALSO NOTICED THAT DURING THE YEAR ASSESSEE HAD ALSO PURC HASED LANDS WHICH WERE SHOWN AS INVESTMENT IN THE BALANCE SHEET. A.O WAS OF THE VIEW THAT THE ASSESSEE PURCHASES AGRICULTURAL LAND AND CONVERTS I T INTO NON AGRICULTURE LAND BY COMPLETING THE NECESSARY LEGAL FORMALITIES AND AFTE R THE CONVERSION OF LAND AS NON AGRICULTURE LAND THE SAME IS SOLD. HE ALSO NO TICED THAT THERE WERE FREQUENT TRANSACTIONS OF LANDS AND THEREFORE THE ACTIVITY OF THE ASSESSEE WAS IN THE NATURE OF ADVENTURE IN THE NATURE OF TRADE. A.O WAS OF T HE VIEW THAT THE ENTIRE SERIES OF TRANSACTION REVEALS THAT ASSESSEE WAS A DEVELOPER A ND NOT AN INVESTOR. HE THEREFORE CONSIDERED THE ASSESSEES INCOME FROM LAN D TRANSACTION AS BUSINESS INCOME AND NOT AS CAPITAL GAIN AS CLAIMED BY THE ASSESSEE. HE ACCORDINGLY DISALLOWED THE CLAIM OF LONG TERM CAPITAL GAIN AN D CONSIDERED THE PROFIT EARNED AS BUSINESS INCOME AND ACCORDINGLY MADE ADDITION OF RS. 1,42,97,628/-. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER:- 3.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHO RIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFICER. WITH REGARD TO LAND APPEARING AT SURVEY NO. 91 THE SAME WAS ACQUIRED IN THE YEAR 1986 UNDER A WILL INDICATING ITS HOLDING WAS F OR A PERIOD OF 20 YEARS. VARIOUS COURTS HAVE HELD THAT IT IS NOT THE TRANSACTION AT THE TIME OF SALE WHICH HAS TO BE CONSIDERED, RATHER THE INTENTION OF THE APPELLANT AT THE TIME OF PURCHASE IS TO BE CONSIDERED. IN THE INSTANT CASE THE APPELLANT HAS NOT PURCHASED THE LAND BUT HAS RECEIV ED IT UNDER A WILL. THE ASSESSING OFFICER HAS CLAIMED THAT THE APPELLANT HAS SOUGHT AND RECEIVED CLEARANCE FROM THE LOCAL AUTHORITY FOR THE PURPOSE OF DEVELOPMENT OF THE SAID LAND. FURTHER, T HE LAND WAS SOLD AFTER PLOTTING THE SAME INTO 206 PLOTS. I DO NOT FIND ANY DISCREPANCY IN GETTING THE CLEARANCE FROM THE LOCAL AUTHORITY CONVERTING AGRICULTURAL LAND INTO NON AGRICULTURAL LAND FOR THE PURPOSE OF MAKING A SALE. THE ASSESSING OFFICER'S CONTENTION THAT THE LAND WAS PL OTTED AND THEN SOLD CANNOT BE FULLY ACCEPTED BECAUSE THE PLOTTING WAS DONE ONLY ON PAPER AND LAN D AS SUCH WAS SOLD AS A SINGLE PIECE TO JANPRIYA TRUST OF DELHI. HENCE IT IS NOT A CASE OF THE LAND BEING BROKEN INTO VARIOUS SMALL SECTIONS AND THEN SOLD. THE LAND WAS INHERITED BY THE APPELL ANT AND AFTER HOLDING THE SAME FOR A PERIOD OF MORE THAN 20 YEARS WAS SOLD. TAXING OF THE INCOME U NDER THE HEAD CAPITAL GAIN IS JUSTIFIED. THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE SAME. WITH REGARD TO LAND REVENUE NO. 287, THE SAID LAND WAS PURCHASED IN THE YEAR 1999 AND THE CONSIDERATION FOR PURCHASE WAS MADE ON ACCOUNT OF M /S. SATYANARAYAN TRADERS WHERE THE ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 9 APPELLANT IS A PARTNER. THIS LAND WAS PURCHASED ALO NG WITH OTHER AND DURING THE YEAR WAS SOLD AFTER BEING HELD FOR A PERIOD OF 8 YEARS. LAND AT R S NO. 485 WAS PURCHASED IN THE YEAR 1999 AND WAS SOLD TO M/S. RAJSHRI DEVELOPERS VIDE A DEVELOPM ENT AGREEMENT. THE APPELLANT WAS NOT THE SOLE OWNER OF THE LAND. IT IS A WELL ESTABLISHED FA CT THAT ONUS LIES ON THE ASSESSEE TO ESTABLISH THAT HOLDING OF THE SAID LAND WAS FOR THE PURPOSE OF INV ESTMENT. THE LAND WAS HELD AS STOCK-IN-TRADE OF M/S. SATYANARAYAN TRADERS. THE APPELLANT HAD NOT EV EN DECLARED THESE LANDS AS AN INVESTMENT IN THE EARLIER YEARS IN HIS BALANCE SHEET. ONCE THE DE CISION WAS TAKEN TO DISPOSE CERTAIN PIECES OF LAND THE AUTHORIZED REPRESENTATIVE CLAIMS THAT THE BALANCE SHEET WAS REFLECTED IN THE ACCOUNTS OF M/S. SATYANARAYAN TRADERS WAS DECLARED IN THE HANDS OF THE INDIVIDUAL MEMBERS. THE REASON FORWARDED BY THE LEARNED AUTHORIZED REPRESENTATIVE WAS THAT ALL THE LANDS WERE SHOWN IN THE HANDS OF M/S. SATYANARAYAN TRADERS BY MISTAKE. M/S. SATYANARAYAN TRADERS ARE IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. THE APPELLANT CLAIMED T HAT THE PLOTS WERE NOT INCLUDED IN THE INDIVIDUAL BALANCE SHEET BY MISTAKE. WHY AND HOW SU CH A MISTAKE CONSISTENTLY OCCURRED HAS NOT BEEN EXPLAINED. IT IS DIFFICULT TO ACCEPT THE APPEL LANT'S CONTENTION THAT A MISTAKE OF INCLUDING IN TH E ACCOUNTS PROPERTY WORTH CRORES WOULD OCCUR YEAR TO YEAR. WHEN THE PROPERTY WAS PURCHASED, IT WAS PURCHASED FOR BUSINESS AND REFLECTED IN THE BAL ANCE SHEET OF THE PARTNERSHIP FIRM. THE CLAIM OF THE APPELLANT THAT PROFIT FROM THE SALE OF PROPE RTY SURVEY NO. 287 IS NOTHING MORE THAN CAPITAL GAIN CANNOT BE ACCEPTED. THE APPELLANT HAS SHOWN TH IS AMOUNT AS AN INVESTMENT IN THE BALANCE SHEET OF THE FIRM WHEREIN HE IS A PARTNER. RELYING ON THE FACT THAT THE DEPARTMENT HAS ACCEPTED EARLIER TRANSACTIONS AS CAPITAL GAINS DOES NOT HELP THE APPELLANT. IN FACT IT WAS ONLY AFTER RECASTING OF THE BALANCE SHEET OF M/S. SATYANARAYAN TRADERS A ND THE PARTNERS HAS THE APPELLANT STARTED TO SELL THE PROPERTIES, THEREBY INDICATING THAT BUSINE SS STOCK HAS BEEN DIVIDED INTO INDIVIDUAL OWNERSHIP AND THEN SOLD. HENCE THE ASSESSING OFFICE R'S CONCLUSION THAT THE INCOME DERIVED FROM THE SALE OF THIS PLOT OF LAND IS INCOME FROM BUSINE SS IS CORRECT AND THE ADDITION OF RS.32,55,053/- IS CONFIRMED 11. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE A ND ASSESSEE ARE NOW IN APPEAL BEFORE US. 12. BEFORE US, LD. D.R. TOOK US THROUGH THE FINDING S AND OBSERVATIONS OF THE A.O. HE FURTHER SUBMITTED THAT THE ASSESSEE PURCHASES LAND AND CONVERTS IT INTO NON AGRICULTURE LAND BY COMPLETING THE LEGAL FORMALITI ES AND AFTER COMPLETION OF THE LEGAL FORMALITIES THE LAND IS SOLD. HE POINTED TO T HE FINDINGS OF A.O SPECIFICALLY THE FINDING THAT ASSESSEE HAD ACQUIRED PERMISSIONS FROM VARIOUS AUTHORITIES FOR CONVERSION OF AGRICULTURAL LAND TO NON AGRICULTURAL LAND AND AFTER DEVELOPING THE LAND AND DIVIDING THE SAME INTO DIFFERENT PLOTS, TH E LAND WAS SOLD BY ASSESSEE. HE FURTHER SUBMITTED THAT THE NATURE OF ACTIVITY OF PURCHASING LAND CONVERTING THE LAND TO NON AGRICULTURE LAND AND SELLING IT WAS IN THE NATURE OF BUSINESS ACTIVITY AND NOT THE CAPITAL GAIN. HE FURTHER SUBMITTED THAT IN A.Y. 05-06 & 06-07 ASSESSEE HAS CLAIMED DEDUCTION UNDER 80IB OF THE AC T MEANING THEREBY THAT THE ASSESSEE IS IN THE BUSINESS OF DEVELOPING LAND AND THEREFORE IT CANNOT BE SAID THAT THE PROFIT EARNED FROM SALE OF LAND WAS IN THE NATURE OF CAPITAL GAINS. HE ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 10 FURTHER SUBMITTED THAT CIT(A) WITH RESPECT TO LAND BEARING SURVEY NO. 91 HAS HELD THAT THE LAND WAS ACQUIRED UNDER A WILL AND THE ASS ESSEE WAS HOLDING IT FOR A PERIOD OF 20 YEARS. HE SUBMITTED THAT THE AFORESAI D SUBMISSION THAT THE LAND WAS ACQUIRED THROUGH THE WILL WAS NEVER MADE BY THE A SSESSEE BEFORE A.O. HE FURTHER SUBMITTED THAT NO OPPORTUNITY WAS GIVEN BY CIT(A) TO THE A.O TO VERIFY AND EXAMINE THE WILL THROUGH WHICH THE ASSESSEE IS STAT ED TO HAVE RECEIVED THE LAND. WITH RESPECT TO LAND AT PLOT NO. 287, HE SUBMITTED THAT THE LAND WAS PURCHASED BY M/S. SATYANARAYAN TRADERS, A FIRM OF THE ASSESSEE W HERE THE ASSESSEE WAS ONE OF THE PARTNERS, THE PURCHASE CONSIDERATION WAS ALS O PAID BY THE FIRM AND THE LAND WAS HELD AS STOCK IN TRADE BY THE FIRM. WITH R ESPECT TO THE SALE OF LAND BEARING SURVEY NO. 287 & 485, HE SUBMITTED THAT CIT (A) HAS RIGHTLY CONSIDERED THE SALE OF LAND AS BUSINESS INCOME AND REQUIRES NO INTERFERENCE. ON THE OTHER HAND, THE LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A) AND SUPPORTED THE ORDER OF CIT(A). 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS THE TREATMENT OF TAX OF THE PROFIT EARNED ON SALE OF LAND. ACCORDING TO THE AO, THE PROFIT IS TO BE TREA TED AS BUSINESS INCOME WHEREAS ACCORDING TO THE A.O, IT IS TO BE TREATED AS CAPITA L GAINS. WITH RESPECT TO THE LAND BEARING SURVEY NO. 91, IT IS STATED THAT ASSESSEE H AD ACQUIRED THE LAND IN THE YEAR 1986 UNDER A WILL MADE BY SHRI MAGANBHAI AMBAL AL PATEL WHO IS STATED TO HAVE EXPIRED ON 05.06.1997. IT IS THEREFORE STATED BY THE ASSESSEE THAT THE LAND WAS ACQUIRED THROUGH WILL MORE THAN 20 YEAR BACK AND THEREFORE ON ITS SALE, THE PROFITS ARISING CANNOT BE CONSIDERED AS CAPITAL GAI N. FROM THE COPY OF THE WILL PLACED AT PAGE 132 OF THE PAPER BOOK, IT IS SEEN TH AT THE WILL IS ONLY NOTARIZED BY NOTARY AND IS NOT REGISTERED NOR IT WAS PROBATED. O N A QUERY BY THE BENCH AS TO WHETHER THE ASSESSEE WAS RELATED TO SHRI MAGANBHAI PATEL, IT WAS SUBMITTED THAT SHRI MAGANBHAI PATEL WAS NOT RELATED TO THE ASSESSE E. IT IS ALSO A FACT THAT THOUGH ASSESSEE HAS SUBMITTED THAT THE LAND WAS REC EIVED BY HIM MORE THAN 20 YEARS BACK, BUT IT IS ALSO A FACT THAT THE AFORESAI D LAND WAS NOT DISCLOSED IN THE BALANCE SHEET OF THE ASSESSEE AFTER ITS ACQUISITION . THOUGH THE LD. A.R. HAS ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 11 SUBMITTED THAT IN THE HAKK PATRAK ( PLACED AT PAG E 137 OF THE PAPER BOOK) WHICH IS RECORD OF RIGHTS, THE NAME OF THE ASSESSEE HAS BEEN ENTERED IN IT. FROM THE COPY OF THE ASSESSMENT ORDER FOR A.Y. 05-06 WHI CH IS PLACED AT PAGE 51 OF THE PAPER BOOK, IT IS SEEN THAT THE ASSESSEE IN THA T YEAR HAD GOT THE ACCOUNTS AUDITED UNDER SECTION 44AB OF THE ACT AND HAD FILED THE TAX AUDIT REPORT ALONG WITH THE BALANCE SHEET, PROFIT AND LOSS ACCOUNT ETC . WHEN THE ASSESSEE IS MAINTAINING THE BOOKS OF ACCOUNTS AND HAD GOT THE S AME AUDITED, NO VALID JUSTIFICATION HAS BEEN OFFERED FOR NOT SHOWING THE LAND ACQUIRED THROUGH INHERITANCE FROM FINANCIAL YEAR 97-98 ONWARDS IN TH E BALANCE SHEET. A.O IN HIS ORDER HAS ALSO NOTED THAT ASSESSEE HAD GOT COMPLETE D VARIOUS LEGAL FORMALITIES LIKE OBTAINING N.A. ORDER FROM COLLECTOR VADODARA, DEVELOPMENT PERMISSION FROM MUNICIPAL CORPORATION, ZONING CERTIFICATE FROM VADO DARA URBAN DEVELOPMENT AUTHORITY GETTING THE LAY OUT PLANS APPROVED, DEVEL OPED THE LAND AND DIVIDED THE LAND INTO 206 PLOTS. FROM THE ASSESSMENT ORDERS FO R A.Y. 05-06 & 06-07 WHICH HAS BEEN PLACED IN THE PAPER BOOK, IT IS SEEN THAT ASSESSEE HAS CLAIMED DEDUCTION U/S. 80IB OF THE ACT FOR THE DEVELOPMENT OF HOUSING PROJECTS MEANING THEREBY THAT THE ASSESSEE WAS ENGAGED IN THE BUSINE SS OF DEVELOPMENT OF HOUSING PROJECTS IN THOSE YEARS. IN VIEW OF THE AFO RESAID FACTS, WE FIND THAT A.O HAS RIGHTLY TREATED THE PROFIT FROM SALE OF LAND BE ARING PLOT NO 91 AS BUSINESS INCOME. 14. WITH RESPECT TO THE LAND AT REVENUE SURVEY NO. 287 & 485, IT WAS SUBMITTED BEFORE CIT(A) THAT THE LAND WAS PURCHASED BY M/S. S ATYANARAYAN TRADERS WHERE THE ASSESSEE WAS A PARTNER ALONG WITH OTHERS AND DU RING THE YEAR, IT WAS SOLD AFTER BEING HELD FOR A PERIOD OF 8 YEARS. BEFORE CI T(A), IT WAS ALSO SUBMITTED THAT THE LANDS SHOWN IN THE HANDS OF SATYANARAYAN TRADER S AND NOT INCLUDED IN THE INDIVIDUAL BALANCE SHEET OF THE ASSESSEE WAS DUE TO MISTAKE. THESE SUBMISSIONS HAVE NOT BEEN FOUND TO BE ACCEPTABLE BY CIT(A). BEFORE US, NOTHING HAS BEEN BROUGHT ON RECORD TO DEMONSTRATE T HAT THE CONSIDERATION FOR THE PURCHASE OF LAND WAS PAID BY THE ASSESSEE AND NOT B Y SATYANARYAN TRADERS, THE FIRM. THE SUBMISSION OF THE ASSESSEE THAT THE NON R ECORDING OF LAND IN THE ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 12 INDIVIDUAL BALANCE SHEETS WAS ON ACCOUNT OF MISTAKE IN ACCOUNTING WAS ALSO NOT ACCEPTED BY CIT(A). BEFORE US THE ASSESSEE COULD NO T DEMONSTRATE AS TO HOW THE MISTAKE CONTINUED FOR SO MANY YEARS MORE SO, WH EN THE ACCOUNTS OF THE FIRM AND THE ASSESSEE WERE AUDITED YEAR AFTER YEAR. FURT HER, LD. CIT(A) HAS GIVEN A FINDING THAT THE LAND WAS HELD AS STOCK IN TRADE OF SATYANARAYAN TRADERS AND THAT THE ASSESSEE HAD NOT DECLARED THESE LANDS AS I NVESTMENT IN THE EARLIER YEARS IN HIS BALANCE SHEET. HE HAS FURTHER GIVEN A FINDING THAT ONLY AFTER RECASTING OF THE BALANCE SHEET OF SATYANARAYAN TRADERS AND TH E PARTNERS, THE ASSESSEE STARTED TO SELL THE PROPERTIES THEREBY INDICATING T HAT BUSINESS STOCK HAS BEEN DIVIDED INTO INDIVIDUAL OWNERSHIP AND THEN SOLD. BE FORE US, LD. A.R. HAS NOT BROUGHT ANY MATERIAL TO CONTROVERT THE AFORESAID FI NDINGS OF CIT(A). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WIT H THE ORDER OF CIT(A) WITH RESPECT TO TREATING THE PROFIT ON SALE OF LAND AT R EVENUE SURVEY NO. 287 AND 485 AS BUSINESS INCOME AS HELD BY A.O AND CONFIRMED BY CIT(A). THUS THE GROUND OF REVENUE IS ALLOWED AND THAT OF ASSESSEE IS DISMI SSED. 15. IN THE RESULT APPEAL OF REVENUE IS PARTLY ALLOWED F OR STATISTICAL PURPOSES AND THE APPEAL OF ASSESSEE IS DISMISSED. NOW WE TAKE UP REVENUES APPEAL IN ITA NO. 2658/AHD /2010 (REVENUES APPEAL) & 2704/AHD/2010 (FOR 2007-08 SHRI HASHMUKHB HAI R. PRAJAPTI ) THE GROUNDS RAISED IN REVENUES APPEAL READS AS UND ER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ID.CIT(APPEALS) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE AGRICULTURAL INCOME AT RS.7,24,132/- AS CLAIMED BY THE ASSESSEE AS AGAINST RESTRICTING THE SAME AT RS.3,74,132/- WITHO UT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAIL ED TO SUBSTANTIATE HIS CLAIM WITH SUPPORTING EVIDENCE TO PROVE THAT HE HAD REALLY CARRIED OUT ANY AGRICULTURAL ACTIVITY AND THAT THE BILLS & VOUCHERS PRODUCED IN SUPPORT OF HIS CLAIM WERE FICTITIOUS A S ELABORATELY DISCUSSED IN THE ASSESSMENT ORDER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ID.CIT (APPEALS) HAS ERRED IN RESTRICTING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF CLAIM O F LONG TERM CAPITAL GAIN AND BY TREATING THE SALE CONSIDERATION OF LAND AS BUSINESS INCOME OF RS. 1,2 1,38,316/- TO RS.10,95,741/-. THE ID.CIT (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE MODUS O PERANDI OF THE ASSESSEE'S BUSINESS IS THAT THE ASSESSEE PURCHASES AGRICULTURAL LAND AND CONVERTS I T IN NON-AGRICULTURAL BY LEGAL FORMALITIES AND SELL THE LAND WITH DEVELOPMENT RIGHT -ADVENTURE IN THE N ATURE OF THE TRADE. THUS, THE ASSESSEE IS NOT AN INVESTOR IN LAND BUT A TRADER AND THE LAND IN THE P OSSESSION OF THE ASSESSEE IS NOT HIS ASSET, BUT MER E STOCK IN TRADE AND THE CONSIDERATION OUT OF SALE OF LAND IN THE CASE OF THE ASSESSEE IS BUSINESS INCOM E IN ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 13 VIEW OF THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF RAJA J. RAMESHWAR RAO VS CIT, 42 ITR 179 AND THE JURISDICTIONAL GUJARAT HIGH COURT IN THE CA SE OF HEMACHAND HIRACHAND SHAH VS CIT, 206 ITR 55. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ID.CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 1,27,83,333/- MADE U/S.41(1) OF THE ACT TOWARDS LIABILITY CEASES TO EXIST. THE ID.CIT(APPEALS) ERRED IN DELETING THE ADDITION WITH OUT GIVING OPPORTUNITY TO THE ASSESSING OFFICER OF REBUTTING THE ASSESSEE'S CLAIM DURING THE APPELLATE PROCEEDINGS WHICH WAS NOT FURNISHED BEFORE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS . THE GROUND RAISED BY THE ASSESSEE READS AS UNDER:- 1.THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-LL, BARODA HAS ERRED IN LAW AND IN FACTS IN HOLDING THAT THE PURCHASE OF LAND OF REVENUE SURVEY NO. 287 WAS THE PROPERTY OF THE PARTNERSHIP FIRM M/S. SATYANARAYAN TRADERS AND WAS REFLECTED IN THE ACCOU NTS AND BALANCE SHEET OF THE PARTNERSHIP FIRM. 2. THE ID. CIT(A) FURTHER ERRED IN LAW AND IN FACTS IN HOLDING THAT BY RECASTING THE ACCOUNTS / BALANC E SHEET OF M/S, SATYANARAYAN TRADERS, THE INVESTMENT IN THE PURCHASE OF LAND AT REVENUE SURVEY NO. 287 IS TRANSFERRED TO THE ACCOUNT OF THE APPELLANT AND, THEREFORE, EVEN THOUGH THE SAID LAND WAS PURCHASED IN THE YEAR 1999, WAS TO BE TREATED AS A BUSINESS A SSET AND THE PROFIT ON ITS SALE AMOUNTING TO RS. 10,95,741/- WAS TO BE TAXED AS BUSINESS INCOME AS A GAINST CAPITAL GAINS DISCLOSED BY THE APPELLANT. THE TAXATION OF THE AMOUNT OF RS. 10,95,741/- BEING THE INCOME FROM SALE OF A CAPITAL ASSET MAY PLEASE BE DIRECTED TO BE ASSESSED AS INCOME FROM SALE OF C APITAL ASSET AS CAPITAL GAINS INSTEAD OF BUSINESS INCOME. 3. THE ID. CIT(A) FURTHER ERRED IN LAW AND IN FACTS AND IN CONTRADICTION TO HER OWN FINDING OF DIRECTI NG THE TAXATION OF CAPITAL GAINS OF RS. 10,95,741/- FR OM THE SALE OF LAND AT SURVEY NO. 287 AS INCOME OF THE APPELLANT DESPITE HOLDING THAT THE LAND AT REVENUE SURVEY NO. 287 WAS PURCHASED AND REFLECTED IN THE ACCOUNTS OF M/S. SATYANARAYAN TRADERS, PARTNERSHIP FIRM. EVEN FROM THIS COUNT, THE TAXATION OF THE AMOUNT OF RS. 10,95,741/- IN THE CASE OF THE APPELL ANT DESERVES DELETION. 18. BEFORE US, BOTH THE PARTIES SUBMITTED THAT EXCE PT GROUND NO. 3 OF REVENUES APPEAL, ALL THE GROUNDS OF REVENUES AND ASSESSEES APPEAL ARE IDENTICAL TO THE GROUNDS RAISED BY REVENUE AND ASSESSEE IN CASE OF SHRI RAMESH PRAJAPATI. WE THEREFORE FOR THE SIMILAR REASONS STA TED HEREINABOVE, WHILE DECIDING THE APPEALS IN THE CASE OF RAMESH PRAJAPAT I, ALLOW GROUND NO. 1 OF REVENUES APPEAL FOR STATISTICAL PURPOSES AND ALLOW GROUND NO. 2 OF REVENUES APPEAL AND THE GROUNDS RAISED IN ASSESSEE S APPEAL ARE DISMISSED. 3 RD GROUND OF REVENUE IS WITH RESPECT TO ADDITION U/S. 41(1). 19. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VERIFICATION OF THE BALANCE SHEET. A.O NOTICED THAT ASSESSEE HAD SHOWN AMOUNT O F RS. 1,48,25,333/- AS ADVANCE RECEIVED AGAINST LAND SALE. THE BREAK UP OF THE ADVANCE RECEIVED AGAINST SALE OF LAND IS TABULATED AT PAGE 10 OF THE ORDER. HE ALSO NOTICED THAT IT ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 14 INCLUDED SUM OF RS. 1,27,83,333/- BEING RECEIPT FRO M JANPRIYA TRUST AGAINST THE SALE OF LAND AT REVENUE SURVEY NO. 91. HE FURTHER N OTICED THAT THE TRANSACTION WITH JANPRIYA TRUST WAS BY VIRTUE OF SALE DEED DATE D 26.12.2006 AND FOR WHICH THE ASSESSEE HAD ALSO RECEIVED THE CONSIDERATION. A .O AS OF THE VIEW THAT WHEN THE DEED OF CONVEYANCE PROVED THAT THE TRANSACTION WAS OVER AND EACH PARTY HAD TAKEN OVER THE POSSESSION OF PROPERTY/CONSIDERATION , THE LIABILITY OF RS. 1,27,83,333/- CEASED TO EXIST. A.O WAS THEREFORE O F THE VIEW THAT SINCE THE LIABILITY HAS CEASED TO EXIST, THE SAME WAS TAXABLE U/S. 41(1) OF THE ACT AND HE ACCORDINGLY ADDED THE AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFOR E CIT(A). CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER:- 5.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHO RIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFICER. THE ADDITION HAS BEEN MADE BY TH E ASSESSING OFFICER ON THE GROUNDS THAT THE APPELLANT'S BALANCE SHEET SHOWS RS.1,27,83,333/- AS A LIABILITY, WHEN SUCH A LIABILITY DOES NOT EXIST. THE ASSESSING OFFICER HAS NOT CONSIDERED THE FACT THAT AGAINST THE SAID LIABILITY, CASH WOULD HAVE BEEN RECEIVED TO BALANCE THE AMOUNT, AND SUCH AMOUNT HAS BEEN OFFERED FOR TAX. SECTION 41(1) CANNOT BE INVOLVED IN SUCH A SITUATION. THE A DDITION MADE BY THE ASSESSING OFFICER IS DIRECTED TO BE DELETED. 20. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE I S NOW IN APPEAL BEFORE US. 21. BEFORE US, LD. D.R. POINTED TO THE FINDINGS OF A.O AND FURTHER SUBMITTED THAT CIT(A) HAS WRONGLY PRESUMED THAT AGAINST THE LIABIL ITY, ASSESSEE WOULD HAVE RECEIVED THE AMOUNT AND SUCH AMOUNT WOULD HAVE BEEN OFFERED FOR TAX AS THERE WAS NO MATERIAL FOR ARRIVING AT SUCH CONCLUSION. HE THEREFORE SUBMITTED THAT IN THE ABSENCE OF ANY EVIDENCE, A.O HAS RIGHTLY MADE THE A DDITION. THE LD. A.R. ON THE OTHER HAND SUPPORTED THE ORDER OF CIT(A). 22. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE HAS HELD THAT THE ASSESSEE WOULD HAVE RECEIVED THE BALANCE AMOUNT FROM JANPRIYA TRUST ON SALE OF LAND AND SUCH AMOUNT HAS BEEN OFFERED TO TA X. BEFORE US, NOTHING HAS BEEN PLACED ON RECORD TO DEMONSTRATE THAT THE SAID AMOUNT WAS RECEIVED BY THE ASSESSEE AND WAS OFFERED TO TAX IN EARLIER YEARS OR IN THE YEAR UNDER ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 15 CONSIDERATION AND THEREFORE PROVISIONS OF SECTION 4 1(1) OF THE ACT WAS NOT APPLICABLE. FURTHER CIT(A) HAD DECIDED THE ISSUE IN A SUMMARY MANNER WITHOUT PASSING A SPEAKING ORDER. FURTHER WE ALSO FIND THAT WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE, NO REMAND REPORT WAS CALLED FROM A.O. WE THEREFORE FEEL THAT IN THE INTEREST OF JUSTICE AND FAIR PLAY, THE SUBMISSION MADE BY THE ASSESSEE BEFORE CIT(A) NEEDS TO BE RE-EXAMINED. WE THEREFORE REMIT THE ISSUE TO THE FILE OF CIT(A) TO DECIDE THE ISSUE AFRESH AFTER CONSIDERIN G THE SUBMISSIONS OF THE ASSESSEE AND AFTER OBTAINING REMAND REPORT FROM A.O . NEEDLESS TO STATE THAT CIT(A) SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO BOTH THE PARTIES. ASSESSEE IS ALSO DIRECTED TO PROMPTLY SUBMIT ALL THE REQUIRE D DETAILS AND ANY ADDITIONAL EVIDENCE THAT IT MAY BE WANT TO RELY. THUS THIS GROUND OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 23. IN THE RESULT, THE APPEAL OF REVENUE IS PARTLY ALLO WED FOR STATISTICAL PURPOSES AND THE APPEAL OF ASSESSEE IS DISMISSED. ITA NO. 2659 & 2703/AHD/2010 (SHRI RAJESHBHAI D. PR AJAPATI). 24. THE GROUNDS RAISED BY THE REVENUE READS AS UNDE R: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE ID.CIT(APPEALS) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE AGRICULTURAL INCOME AT RS.9,16,424/- AS CLAIMED BY THE ASSESSEE AS AGAINST RESTRICTING THE SAME AT RS.4,66,424/- WITHO UT APPRECIATING THE FACT TR AT THE ASSESSEE HAD FAI LED TO SUBSTANTIATE HIS CLAIM WITH SUPPORTING EVIDENCE TO PROVE THAT IT HAD REALLY CARRIED OUT ANY AGRICULTURAL ACTIVITIES AND THAT THE BILLS AND VOUC HERS PRODUCED IN SUPPORT OF HIS CLAIM WERE FICTITIO US AS ELABORATELY DISCUSSED IN THE ASSESSMENT ORDER 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ID.CIT (APPEALS) HAS ERRED IN RESTRICTING TH E ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF CLAIM O F LONG TERM CAPITAL GAIN AND BY TREATING THE SALE CONSIDERATION OF LAND AS BUSINESS INCOME OF RS.1,47 ,64,314/- TO RS.3,21,766/-. THE ID.CIT (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE MODUS O PERENDI OF THE ASSESSEE'S BUSINESS IS THAT THE ASSESSEE PURCHASES AGRICULTURAL LAND AND CONVERTS I T IN NON-AGRICULTURAL BY LEGAL FORMALITIES AND SELL THE LAND WITH DEVELOPMENT RIGHT -ADVENTURE IN THE N ATURE OF THE TRADE. THUS, THE ASSESSEE IS NOT AN INVESTOR IN LAND BUT A TRADE R AND THE LAND IN THE POSSESSION OF THE ASSESSEE IS NOT HIS ASSET, BUT MERE STOCK IN TRADE AND THE CONSIDERATION OUT OF SALE OF LAND IN THE CASE OF THE ASSESSEE IS BUSINESS INCOM E IN VIEW OF THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF RAJA J.RSMESHWAR RAO VS CIT, 42 ITR 179 AND THE JURISDICTIONAL GUJARAT HIGH COURT IN THE CA SE OF HEMACHAND HIRACHAND SHAH VS CIT, 206 ITR 55. 25. THE GROUND RAISED BY THE ASSESSEE READS AS UNDE R:- ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 16 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-LL, BA RODA HAS ERRED IN LAW AND IN FACTS IN HOLDING THAT THE PURCHASE OF LAND OF REVENUE SURVEY NO. 287 WAS THE PROPERTY OF THE PARTNERSHIP FIRM M/S. SATYANARAYAN TRADERS AND WAS REFLECTED IN THE ACCOUNTS AND BALANCE SHEET OF THE PARTNERSHIP FIRM. 2. THE ID. CIT(A) FURTHER ERRED IN LAW AND IN FACTS IN HOLDING THAT BY RECASTING THE ACCOUNTS / BALANCE SHEET OF M/S. SATYANARAYAN TRADERS, THE INVESTMENT IN THE PURCHASE OF LAND AT REVENUE SURVEY NO. 287 IS TRANSFERRED TO THE ACCOUNT OF THE APPELLANT AND, THEREFORE, EVEN THOUGH THE SAID LAND WAS PURCHASED IN THE YEAR 1999, WAS TO BE TREATED AS A BUSINESS ASSET AND THE PROFIT ON ITS SALE AMOUNTING TO RS. 10,95,741/- WAS TO BE TAXED AS BUS INESS INCOME AS AGAINST CAPITAL GAINS DISCLOSED BY THE APPELLANT. THE TAXATION OF THE AMO UNT OF RS. 10,95,741/- BEING THE INCOME FROM SALE OF A CAPITAL ASSET MAY PLEASE BE DIRECTED TO B E ASSESSED AS INCOME FROM SALE OF CAPITAL ASSET AS CAPITA! GAINS INSTEAD OF BUSINESS INCOME. 3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-LL, BA RODA HAS ERRED IN LAW AND IN FACTS IN HOLDING THAT THE PURCHASE OF LAND OF REVENUE SURVEY NO. 1280 WAS THE PROPERTY OF THE PARTNERSHIP FIRM M/S. SATYANARAYAN TRADERS AND WAS REFLECTED IN THE ACCOUNTS AND BALANCE SHEET OF THE PARTNERSHIP FIRM. 4. THE LD. CIT(A) FURTHER ERRED IN LAW AND IN FACTS IN HOLDING THAT BY RECASTING THE ACCOUNTS / BALANCE SHEET OF M/S. SATYANARAYAN TRADERS, THE INV ESTMENT IN THE PURCHASE OF LAND AT REVENUE SURVEY NO. 1280 IS TRANSFERRED TO THE ACCOUNT OF TH E APPELLANT AND, THEREFORE, EVEN THOUGH THE SAID LAND WAS PURCHASED IN THE YEAR 1992, WAS TO BE TREA TED AS A BUSINESS ASSET AND THE PROFIT ON ITS SALE AMOUNTING TO RS. 26,26,025/- WAS TO BE TAXED A S BUSINESS INCOME AS AGAINST CAPITAL GAINS DISCLOSED BY THE APPELLANT. THE TAXATION OF THE AMO UNT OF RS. 26,26,025/- BEING THE INCOME FROM SALE OF A CAPITAL ASSET MAY PLEASE BE DIRECTED TO B E ASSESSED AS INCOME FROM SALE OF CAPITAL ASSET AS CAPITAL GAINS INSTEAD OF BUSINESS INCOME. 5. THE LD. CIT(A) FURTHER ERRED IN LAW AND IN FACTS AN D IN CONTRADICTION TO HER OWN FINDING OF DIRECTING THE TAXATION OF CAPITAL GAINS OF RS.37,21 ,766/- (RS.10,95,741/- + RS.26,26,025/-) FROM THE SALE OF LAND AT SURVEY NOS. 287 AND 1280 AS INC OME OF THE APPELLANT DESPITE HOLDING THAT THE LAND AT REVENUE SURVEY NO. 287 AND 1280 WERE PURCHA SED AND REFLECTED IN THE ACCOUNTS OF M/S. SATYANARAYAN TRADERS, PARTNERSHIP FIRM. EVEN FROM T HIS COUNT, THE TAXATION OF THE AMOUNT OF RS. 37,21,766/- IN THE CASE OF THE APPELLANT DESERVES D ELETION,. 26. BEFORE US, BOTH THE PARTIES SUBMITTED THAT THE GROUNDS RAISED IN THE PRESENT APPEALS OF ASSESSEE AND REVENUE ARE IDENTICAL TO GR OUNDS RAISED BY REVENUE AND ASSESSEE IN THE CASE OF SHRI RAMESH PRAJAPATI I N (ITA NO. 2657 & 2702/AHD/2010). WE THEREFORE FOR THE REASONS STATED WHILE DECIDING THE APPEAL IN THE CASE OF SHRI RAMESH PRAJAPATI (SUPRA) AND FO R THE SAME REASONS ALSO DECIDE THE PRESENT GROUNDS. IN THE RESULT THE APPEA L OF REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF ASSESSEE IS DISMISSED. ITA NO. 238/AHD/2011 (SHRI RAMANBHAI C. PRAJAPATI) 27. THE GROUNDS RAISED BY THE ASSESSEE READS AS UND ER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED C.I.T.(A) ERRED IN ASSESSING RS.45000 0/- AS BUSINESS INCOME RETURNED AS AGRICULTURAL INCOME BY YOUR APPELLANT. ITA NOS. 2657 , 2658, 2659, 2702, 2703 2704/A/2010 & 238/A/2011 . A.Y. 2007- 08 17 THE LEARNED C.I.T.(A) FAILED TO APPRECIATE THE FACT S OF THE CASE IN ITS PROPER PERSPECTIVE AND HAD MECHANICALLY CONFIRMED THE ACTION OF THE A.O. YOUR APPELLANT THEREFORE IN THE INTEREST OF JUSTICE PRAYS HEREBY TO DELETE THE SAID ADDITION OF RS.450 000/- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED C.I.T.(A) ERRED IN CONFIRMING THE ASSESSMENT OF RS.7512128/- AS BUSINESS INCOME INSTE AD OF LONG TERM CAPITAL GAIN RETURNED BY YOUR APPELLANT. THE LEARNED CI.T.(A) FAILED TO APPRECIATE THE FACTS OF THE CASE AND CONFIRMED THE ASSESSMENT OF THE IN COME UNDER DIFFERENT HEAD THAN RETURNED BY YOUR APPELLAN T AND THEREBY DENYING LEGITIMATE DEDUCTION U/S.54EC OF RS.6250000/- OF INVESTMENT MADE BY YOUR APPELLAN T AND AS ALSO NOT GRANTING INFLATED INDEXATION OF C OST. YOUR APPELLANT THEREFORE HEREBY PRAYS THAT THE A.O. BE DIRECTED ASSESS THE IMPUGNED SUM OF RS.7321354/ - AS LONG TERM CAPITAL GAIN AND GRANT THE DEDUCTION U /SS.54EC AND 48 AS MAY BE AVAILABLE AS PER THE PROVISIONS OF THE ACT. 28. BEFORE US, BOTH THE PARTIES SUBMITTED THAT THE GROUNDS RAISED IN THE PRESENT APPEAL ARE IDENTICAL TO GROUNDS RAISED IN ASSESSEE S APPEAL IN THE CASE OF SHRI RAMESH PRAJAPATI IN (ITA NO. 2702/AHD/2010). WE THE REFORE FOR THE REASONS STATED HEREINABOVE WHILE DECIDING THE APPEAL IN THE CASE OF SHRI RAMESH PRAJAPATI (SUPRA) ALSO DECIDE THE PRESENT GROUNDS A ND DISMISS THE APPEAL OF THE ASSESSEE. 29. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMISSED. 30. IN THE RESULT, THE APPEALS OF REVENUE ARE PARTLY AL LOWED FOR STATISTICAL PURPOSES AND APPEAL OF ASSESSEE ARE DISMISSED. SD/- SD/- ( G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT AC COUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH 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,AH MEDABAD ORDER PRONOUNCED IN OPEN COURT ON 11 - 07 - 2014.