Vaishali M.Potdar, Pune V. Income-tax Officer, Ward - 7(1), Pune

ITA 296/PUN/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4890 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 09-01-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 06-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Assessee Lawyers: SHARAD A SHAH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income
• Section: 50C

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NO. 296/PUN/2018 !' # $# / ASSESSMENT YEAR : 2010-11 MRS. VAISHALI M. POTDAR, B-23, SOMESHWAR APARTMENT, NEAR SHINDE HOSPITAL, SINHGAD ROAD, VADGAON (BK), PUNE. PAN : AQUPP0425G ....... / APPELLANT %' / V/S. THE INCOME TAX OFFICER, WARD 7(1), PUNE. / RESPONDENT APPELLANT BY : SHRI SHARAD A. SHAH RESPONDENT BY : SHRI M.K. VERMA / DATE OF HEARING : 11.02.2019 / DATE OF PRONOUNCEMENT : 11.02.2019 & / ORDER PER D. KARUNAKARA RAO, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS), PUNE-5, PUNE DATED 13.10.2017 FOR THE ASSESSM ENT YEAR 2010- 11. 2 ITA NO.296/PUN/2018 A.Y.2010-11 2. BRIEFLY STATED RELEVANT FACTS INCLUDE THAT THE ASSESSE E IS A CIVIL AND LABOUR CONTRACTOR AND IS ENGAGED IN THE BUSINESS OF PURC HASE AND SALE OF LAND. THE ASSESSEE ENTERED INTO A MEMORANDUM OF UNDERS TANDING (MOU) WITH GOKA ENGG. COMPANY PVT. LTD FOR AGGREGATION AND SA LE OF LAND. THERE WERE MANY SUCH AGGREGATORS NAMED IN THE MOU. THE ASS ESSEE IS ONE OF THE AGGREGATOR WHO ACQUIRED THE LAND FROM FARMERS. ON OBTAINI NG THE LANDS, ALL THE RIGHTS ON THE LAND STANDS TRANSFERRED TO THE COMP ANY. AS PER THE ASSESSEE, THE LAND CONSTITUTES STOCK-IN-TRADE AND NOT A N INVESTMENT. NO FINANCIAL STATEMENT WAS MAINTAINED BY THE ASSESSEE IN THIS REGARD. DURING THE YEAR, THE ASSESSEE ENTERED INTO VARIOUS TRANSACTION S REGARDING PURCHASE AND SALE OF LAND BY THE ASSESSEE. AS PER THE ASSESSEE T HESE SALE TRANSACTIONS CONSTITUTES BUSINESS TRANSACTION. DURING ASSESSMENT PROC EEDINGS, THE ASSESSING OFFICER DISTURBED THE CLAIM OF THE ASSESSEE AND T REATED THE TRANSACTION AS CAPITAL INVESTMENT AND INVOKED THE PR OVISION OF SECTION 50C OF THE ACT. THE ASSESSING OFFICER COMPUTED THE ASSESSED INCOME OF ASSESSEE AT RS. 5,53,240/- AS AGAINST THE RETURN OF INCOME OF RS.91,952/-. 3. AGGRIEVED WITH THE ASSESSMENT ORDER, THE ASSESSEE FILE D APPEAL BEFORE THE CIT(APPEALS). THE CIT(APPEALS) CONFIRMED THE FINDINGS OF THE ASSESSING OFFICER ON THIS ISSUE AND DISMISSED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED WITH THE ORDER OF THE ASSESSING OFFICER AND T HE CIT(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING FOLLOWING GROUN DS: I) THE LEARNED ASSESSING OFFICER ERRED IN TAXING I NCOME UNDER THE HEAD PROFIT & GAINS FROM BUSINESS AS INCOME FROM CAPITA L GAIN. II) THE LEARNED ASSESSING OFFICER OUGHT TO HAVE CON SIDERED PROFIT ON SALE OF LANDS AS BUSINESS INCOME. III) THE LEARNED ASSESSING OFFICER FAILED TO TAKE I NTO ACCOUNT THAT THE AGRICULTURAL LANDS SOLD WERE BUSINESS ASSETS OF THE ASSESSEE AND NOT CAPITAL ASSETS AS CLAIMED IN THE ASSESSMENT ORDER. 3 ITA NO.296/PUN/2018 A.Y.2010-11 IV) THE LEARNED ASSESSING OFFICER FAILED TO TAKE IN TO ACCOUNT THAT SECTION 50C WAS NOT APPLICABLE FOR SALE OF BUSINESS ASSETS. THE ASSESSEE CRAVES LEAVE TO ADD, AMEND AND DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 5. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THE FACTS OF THE CASE AND MENTIONED THAT SAME TRANSACTIONS WERE ACCEPT ED BY THE REVENUE AUTHORITY AS STOCK-IN-TRADE IN THE CASE OF SHRI MADHUKAR S. KADU FOR THE ASSESSMENT YEAR 2010-11. THE LD. AR SUBMITTED THAT SHR I MADHUKAR S. KADU IS ONE OF THE AGGREGATOR FOR THE GOKA ENGG. COMPAN Y PVT. LTD. THE LD. A.R. READ OUT THE CONTENTS OF PARA 4 AND ITS SUB-PARAS OF THE ASSESSMENT ORDER. FURTHER, THE ASSESSEE FILED THE FOLLOWING WRITTEN SU BMISSIONS PROVIDING THAT THE TRANSACTION OF SALE CONSTITUTES A BUSINESS TRAN SACTION. THE SAME ARE EXTRACTED HEREUNDER: 1. THE ASSESSEE IS LAND AGGREGATOR AS IS POPULARLY KNO WN IN MAHARASHTRA. AS AGRICULTURAL LAND CANNOT BE DIRECTL Y PURCHASED BY LAND DEVELOPERS, THEY TAKE THE SERVICES OF LAND AGG REGATORS. THE PROCESS OF GETTING NA PERMISSION IS CARRIED OUT BY THE REAL DEVELOPERS AND AFTER THE LAND GETS NA PERMISSION, T HE COMPANY ACQUIRES THE LAND FROM AGGREGATORS. THE LANDS WERE PURCHASED BY ME BUT THE EXPENSE FOR MAKING LAND 'NA' WAS DONE BY THE PURCHASER COMPANY. FOR THE AGGREGATORS, THE LAND IS NEVER PURCHASED AS INVESTMENT OR AS A CAPITAL ASSET BUT IS PURCHASED AS PASS THROUGH AR RANGEMENTS. AS THIS ACTIVITY IS A REGULAR FEATURE, THE INCOME FROM SUCH ACTIVITY SHOULD BE TREATED AS INCOME FROM BUSINESS AND PROFESSION A ND SHOULD NOT BE CHARGED AS CAPITAL GAINS. 2. IN THE CASE OF THIS ASSESSEE ALSO THERE ARE MANY TRANSACTIONS SPREAD OVER MANY YEARS AND THAT AGAIN SUPPORTS THIS IS REGULAR ACTIVITY OF INCOME EARNING WHICH SHOULD GENERALLY C HARGED AS INCOME FROM BUSINESS AND PROFESSION. EVEN THE ORDER OF AO AT PARA 4 AND 5 (PAGE 2) TOGET HER, ONE FINDS MULTIPLE TRANSACTIONS. EVEN CIT(A) ALSO NARRATES HAPPENING OF MANY TRANSAC TIONS AT PARA 4.1 (PAGE 3 AND 4). AS DIRECTED BY HON. BENCH, WE ALSO SUBMITTED COPIES OF VARIOUS MOU/S IN PAPER BOOK WHERE MOU/S WERE AT PAGE 2, 20, 46, 63, 78 (ONWARDS) OF PAPER BOOK WHICH ESTABLISHES THE FACT THAT THE ASSESSEE CONTINUES THIS ACTIVITY ON A REGULAR BASIS AND ALSO ESTABLISHES THE FACT THAT THE PURCHASES OF LAND WAS ALWAYS FOR THE DEVELOPERS M/S. GOKA ENGINEERING COMPANY PVT LTD. 4 ITA NO.296/PUN/2018 A.Y.2010-11 IN A WAY THE ASSESSEE NEVER INTENDED TO KEEP PLOTS OF LAND AS INVESTMENT OR CAPITAL ASSET. 3. IT WAS ALSO POINTED OUT THAT ANOTHER AGGREGATOR MR. MADHUKAR SADASHIV KADU (WHO IS ONE OF THE TRANSACTION NO.2 W AS ASSESSED FOR THE SAME TRANSACTION UNDER THE HEAD 'BUSINESS A ND PROFESSION'. AS PER THE DIRECTION OF HON. BENCH THE COPY OF THE ASSESSMENT ORDER WAS SUBMITTED. 4. THE REGULAR BOOKS OF ACCOUNTS WERE NOT MAINTAINE D FOR THE REASONS THAT ALL THE SALE TRANSACTIONS WERE WITH ON E COMPANY ONLY NAMELY GOKA ENGINEERING COMPANY PVT LTD. HOWEVER, T HE NOTING WERE DONE IN A DIARY. 5. WE, THEREFORE, PRAY THAT INCOME OF THE ASSESSEE SHOULD BE CHARGED UNDER THE HEAD 'BUSINESS INCOME'. 6. AS A CONSEQUENCE THERE OF AN APPLICATION OF S. 50C IS NOT CALLED FOR AND ORDINARY PROFIT (ACTUAL SALE PRICE LESS COS T PRICE) BE CHARGED TO TAX. 6. THE LD. DR FOR THE REVENUE HEAVILY RELIED ON THE ORD ERS OF THE ASSESSING OFFICER AND CIT(APPEALS). 7. BOTH SIDES HEARD AND PERUSED THE ORDERS OF THE REV ENUE AUTHORITIES ON THE LIMITED ISSUE THAT THE TRANSACTION UNDERTAKEN BY THE ASSESSEE WITH GOKA ENGG. COMPANY PVT. LTD. FALLS IN THE SCOPE OF CAPITAL GAINS OR BUSINESS INCOME. I HAVE ALSO PERUSED THE PARA 4 OF THE ASSESSME NT ORDER OF SHRI MADHUKAR SADASHIV KADU. FOR THE SAKE OF COMPLETENESS, TH E SAME IS EXTRACTED HEREIN BELOW: 4. AFTER VERIFYING THE DETAILS SUBMITTED, VIZ., BAN K STATEMENT, COPIES OF MEMORANDUM OF UNDERSTANDING, SALE DEED AND OTHER DE TAILS SUBMITTED DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE FOLLOWING A DDITIONS/DISALLOWANCES ARE MADE: A. INCOME FROM SALE OF LAND : DURING THE PERIOD UNDER CONSIDERATION ASSESSEE WAS DEALING IN SALE & PURCHASE OF LAND. TH E DETAILS OF LAND SOLD DURING THE PERIOD AND THE PROFIT EARNED ARE AS UNDE R: LAND AT BEDGAON : ASSESSEE PURCHASED LAND AT GAT NO.67/4 AT VILLAGE BEDGAON ON 12.2.2009 FOR A TOTAL CONSIDERATION OF R S.2,62,940/- AND SOLD THE SAME TO M/S.GOKA ENGINEERING CO. PVT. LTD., VID E MOU DATED 12.5.2009 FOR A TOTAL CONSIDERATION OF RS.3,00,000/- THEREBY EARNING A PROFIT OF RS.37,060/-. LAND AT SANASWADI: ASSESSEE PURCHASED LAND AT GAT NO.54/4 AT VILLAGE SANASWADI ON 3.2.2009 FOR A TOTAL CONSIDERATION OF RS.95,100/- AND SOLD THE SAME TO M/S. GOKA ENGINEERING CO. PVT. LTD., VI DE, MOU DATED 5 ITA NO.296/PUN/2018 A.Y.2010-11 12.05.2009 FOR A TOTAL CONSIDERATION OF RS.1,10,000 / - THEREBY EARNING A PROFIT OF RS.14,900/-. THUS, ASSESSEE EARNED A TOTAL PROFIT OF RS.51,960 /- ON SALE OF LANDS DURING THE YEAR. THE SAID PROFIT WAS NOT OFFERED FO R TAXATION IN THE RETURN OF INCOME FILED. THE A.R VIDE HIS LETTER DATED 05.03.2 012 SUBMITTED THAT THE SAID INCOME WAS INADVERTENTLY FORGOTTEN TO INCLUDE THIS PROFIT IN THE RETURN OF INCOME FILED FOR THE PERIOD UNDER CONSIDERATION. ACCORDINGLY, AN AMOUNT OF RS.51,960/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD BUSINESS INCOME. PENALTY PROCEEDINGS U/S.271(1)(C) ARE INITIATED SEPARATELY FOR CONCEALMENT OF INCOME. I HAVE ALSO PERUSED THE LIST OF TRANSACTIONS UNDERTAKEN BY THE ASSESSEE WITH GOKA ENGINEERING CO. PVT. LTD. THE ASSESSEE UNDERTOO K THE SALE TRANSACTIONS WITH GOKA ENGINEERING CO. PVT. LTD. AND DETAIL S ARE TABULATED AS FOLLOWS: SR. NO. MOU DATE MOU AMOUNT GAT NO. FOR RESPECTIVE PURCHASE 1 15/05/2018 3,53,000 81/10B 81/10F 86/2 58/14 81/10E TOTAL 3,53,000 2. 26/6/2008 1,85,000 80/10 80/13 TOTAL 1,85,000 3 25/5/2008 1,40,000 81/8 81/10D 81/5 57/0 58/9 TOTAL 1,40,000 4. 30/11/2007 2,00,700 87/7B, 81/10A TOTAL 2,00,700 6 ITA NO.296/PUN/2018 A.Y.2010-11 FROM THE ABOVE CHART, IT IS EVIDENT FROM THE LIST OF TRANS ACTIONS THAT THE ASSESSEE IS MERELY AN AGGREGATOR AND HIS ACTIVITIES FALLS IN THE SCOPE OF BUSINESS OF AGGREGATION FOR GOKA ENGINEERING CO. PVT. LTD. I HAVE ALSO PERUSED THE MOU THE COPY OF WHICH ARE PLACED AT PAGE 2 , 3, 21, 46, 47, 63 , 64, 78 AND 79 OF THE PAPER BOOK AND FIND, THERE IS REGULA R BUSINESS TRANSACTIONS WITH GOKA ENGINEERING CO. PVT. LTD. FURTHER, ON THE SIMILAR FACTS IN THE CASE OF SHRI MADHUKAR SADASHIV KADU, THE REVENUE AUTHORITIES ALLOWED THE CLAIM OF ASSESSEE BY TREATING THE TRANSACTION AS BUSINESS TRANSACTION AND NOT INVESTMENT. 8. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE A S WELL AS THE PRECEDENT IN THE CASE OF ANOTHER AGGREGATOR, I AM OF T HE VIEW THAT THE CLAIM OF THE ASSESSEE IS FAIR AND REASONABLE AND IT DOES NOT CA LL FOR ANY INTERFERENCE. ACCORDINGLY, THE ORDERS OF ASSESSING OFFICER A ND CIT(APPEALS) ARE HEREBY REVERSED. THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 11 TH DAY OF FEBRUARY, 2019. SD/- ( . / D. KARUNAKARA RAO ) ' ACCOUNTANT MEMBER / PUNE; / DATED : 11 TH FEBRUARY, 2019. SB TOTAL (TRANSACTION 2) 8,78,700/- 5. 5/11/2009 4,20,000 76(2B) ( TRANSACTION- 1) 7 ITA NO.296/PUN/2018 A.Y.2010-11 &()!*+,-,$* / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS), PUNE-5, PUNE. 4. THE PR. CIT, PUNE-4, PUNE. 5. !'# $$ %& , ' %& , - ()* , / DR, ITAT, SMC BENCH, PUNE. 6. #+, -. / GUARD FILE. // TRUE COPY // '/ / BY ORDER, $ 0 %* /PRIVATE SECRETARY ' %& , / ITAT, PUNE. 8 ITA NO.296/PUN/2018 A.Y.2010-11 DATE 1 DRAFT DICTATED ON 11.02.2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 12.02.2019 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER