Manish Shukla, RAIGARH(CG) V. Asstt.Commissioner of Income-tax -1(1), BILASPUR(CG)

ITA 3/BIL/2013

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3515 (ITAT-RAIPUR)
• Duration Of Justice: 6 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 26-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S R RAO
• Keywords: Unexplained cash credit; Capital asset converted into stock in trade; Tax effect
• Section: 45(2); 54B; 54F; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEMBER) ITA. NO: 03 & 05/BLPR/2013 (ASSESSMENT YEAR: 2008-09) MANISH SHUKLA VILL: CHHOTE ATTARMUDA RAIGARH (C.G.) ASSTT.COMMISSIONER OF INCOME TAX-1(1), BILASPUR V/S V/S ASSTT.COMMISSIONER OF INCOME TAX-1(1), BILASPUR MANISH SHUKLA VILL: CHHOTE ATTARMUDA RAIGARH (C.G) (APPELLANT) (RESPONDENT) PAN: AAPPT0319Q APPELLANT BY : SHRI S. R. RAO, AR RESPONDENT BY : SHRI SANJAY KUMAR, D.R. ( )/ ORDER DATE OF HEARING : 09 -03-201 8 DATE OF PRONOUNCEMENT : 16 -04-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. ITA NO. 03/BLPR/2013 & 05/BLPR/2013 ARE CROSS APPEA LS BY THE ASSESSEE AND THE REVENUE PREFERRED AGAINST THE ORDER OF THE LD. CIT(A), BILASPUR DATED 30.10.2012 PERTAINING TO A.Y. 2008-09. ITA NOS. 03 & 05/RPR/2013 . A.Y. 2008-09 2 2. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE DISP OSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. WE WILL FIRST TAKE UP IN ITA NO. 03/BLPR/2013 ASSES SEES APPEAL 4. THE FIRST GRIEVANCE OF THE ASSESSEE IS THAT THE LD . CIT(A) ERRED IN DENYING THE EXEMPTION U/S. 54B OF THE ACT ON THE LONG TERM CAPI TAL GAIN EARNED BY THE ASSESSEE. 5. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE IN HIS INDIVIDUAL CAPACITY, PURCHASED 8.22 ACRES OF LAND FOR A TOTAL CONSIDERATION OF RS. 17,000/-. THE ASSESSEE CLAIMED THAT HE HAS THROWN THE PROPERT Y INTO HUF HOTCHPOTCH. THE A.O. DECLINED THE CLAIM OF THE ASSESSEE THAT TH E SAID LAND BELONGS TO HIS HUF. 6. THE ASSESSEE FURTHER CLAIMED THAT HE CONVERTED THE SAID AGRICULTURAL LAND INTO STOCK IN TRADE AND ACCORDINGLY DRAWING SUPPORT FROM THE PROVISIONS OF SECTION 45(2) OF THE ACT, THE LONG TERM CAPITAL GAIN WAS CO MPUTED AT RS. 16.65 LACS. THE ASSESSEE CLAIMED EXEMPTION U/S. 54B OF THE ACT ON T HE GROUND THAT HE HAS PURCHASED ANOTHER AGRICULTURAL LAND OF RS. 29.51 LA CS. THE A.O. WAS OF THE OPINION THAT NO AGRICULTURAL INCOME WAS OFFERED BY THE ASSESSEE, THEREFORE, THE ASSESSEE FAILED TO PROVE THAT HE HAS PURCHASED AGRI CULTURAL LAND AND ACCORDINGLY THE CLAIM OF EXEMPTION U/S. 54B OF THE ACT WAS DENI ED. 7. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED ITS CLAIM OF EXEMPTION U/S. 54B OF THE ACT. THE LD. CIT(A) AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS OBSERVED THAT THE COMPUTATION OF CA PITAL GAIN IS NOT IN DISPUTE ITA NOS. 03 & 05/RPR/2013 . A.Y. 2008-09 3 BUT THE DISPUTE IS RELATED TO THE ADMISSIBILITY OF EXEMPTION U/S. 54B OF THE ACT ON INVESTMENT MADE IN PURCHASE OF AGRICULTURAL LAND . THE LD. CIT(A) WAS OF THE OPINION THAT AS PER THE PROVISIONS OF SECTION 54B O F THE ACT, THE ASSESSEE HAS NOT SHOWN ANY AGRICULTURAL INCOME AND THEREFORE THE EXEMPTION IS RIGHTLY DENIED. 8. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMEN TLY STATED THAT THE ONLY REQUIREMENT OF THE PROVISIONS OF SECTION 54B OF THE ACT IS THAT THE LAND MUST BE USED FOR AGRICULTURAL PURPOSES IN THE IMMEDIATEL Y PRECEDING TWO YEARS AND ON THE TRANSFER OF SUCH LAND, THE ASSESSEE HAVE TO PURCHASE ANOTHER AGRICULTURAL LAND WITHIN A PERIOD OF TWO YEARS AND THE SAID LAND MUST ALSO BE USED FOR AGRICULTURAL PURPOSES. IT IS THE SAY OF THE LD. COU NSEL THAT THERE IS NO DISPUTE THAT THE TRANSFERRED LAND AND THE NEW LAND PURCHASED WER E AGRICULTURAL LAND AND THEREFORE THE CLAIM OF DEDUCTION U/S. 54B OF THE AC T HAS TO BE ALLOWED. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FINDING S OF THE A.O. 9. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. THERE IS NOT DISPUTE THAT DURING THE YEAR, T HE ASSESSEE HAS TRANSFERRED AGRICULTURAL LAND. THERE IS ALSO NO DISPUTE THAT TH E NEW LAND PURCHASED BY THE ASSESSEE IS ALSO AN AGRICULTURAL LAND. THIS MEANS T HAT THE TRANSFERRED LAND AND THE NEW LAND WERE BOTH USED FOR AGRICULTURAL PURPOS ES. NOWHERE IN THE PROVISION OF SECTION 54B, IT IS MENTIONED THAT THE ASSESSEE MUST DERIVE AGRICULTURAL INCOME FROM THE IMPUGNED LAND. THEREFO RE, IN OUR CONSIDERED OPINION, THE ACTION TAKEN BY THE LOWER AUTHORITIES IS ERRONEOUS AND DESERVE TO BE VACATED. WE ACCORDINGLY DIRECT THE A.O. TO ALLOW THE CLAIM OF EXEMPTION U/S. 54F OF THE ACT. THIS GRIEVANCE IS ACCORDINGLY ALLOWED. ITA NOS. 03 & 05/RPR/2013 . A.Y. 2008-09 4 10. THE NEXT GRIEVANCE RELATES TO THE ADDITION OF RS. 7 ,50,564/- ON ACCOUNT OF OPENING CAPITAL. 11. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCE EDINGS, THE A.O. NOTICED THAT THE OPENING BALANCE IN THE CAPITAL ACCOUNT OF THE ASSESSEE AS ON 01.04.2007 WAS RS. 57,35,662/-. THE A.O. ASKED THE ASSESSEE TO FURNISH THE SOURCE OF OPENING CAPITAL. ASSESSEE EXPLAINED THAT RS. 20,21, 514 WAS ON ACCOUNT OF CONVERSION OF ASSET INTO STOCK IN TRADE, RS. 22,50, 964/- WAS THE SALE CONSIDERATION OF LAND SOLD BETWEEN 1998 TO 2003 AND RS. 14,63,184/- WAS SALE OF AGRICULTURAL PRODUCE. THE A.O. WAS NOT CONVINCED WITH THE CLAIM OF THE AGRICULTURAL INCOME OF RS. 14,63,184/-. THE A.O. WA S OF THE OPINION THAT THE ASSESSEE MUST HAVE INCURRED SOME EXPENDITURE AND TH EREFORE THE BALANCE AVAILABLE WITH THE ASSESSEE COULD BE ONLY RS. 4,48, 920/-. THE A.O. GAVE CREDIT OF THIS AMOUNT AND MADE ADDITION OF RS. 10,14,264/- AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. 12. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT MUCH SUCCESS. 13. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERA TED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES AND THE LD. D.R. SUPPO RTED THE FINDINGS OF THE A.O. THERE IS NO DISPUTE THAT THE CAPITAL BALANCE AS ON 01.04.2007 WAS SHOWN AT RS. 57,35,662/- THIS MEANS THAT IT WAS OPENING CREDIT B ALANCE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. IN OUR CONSIDERED OPINION , PROVISIONS OF SECTION 68 ARE NOT AT ALL APPLICABLE ON THE OPENING CREDIT BAL ANCE OF THE YEAR. IN OUR CONSIDERED OPINION, THE ADDITION MADE U/S. 68 OF TH E ACT IS CONTRARY TO THE PROVISIONS OF THE LAW AND DESERVE TO BE DELETED. WE DIRECT ACCORDINGLY. THIS GROUND IS ALSO ALLOWED. ITA NOS. 03 & 05/RPR/2013 . A.Y. 2008-09 5 14. THE LAST GRIEVANCE OF THE ASSESSEE RELATES TO THE A DDITION OF RS. 13,32,625/-. 15. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. FOUND THAT THE ASSESSEE HAS SHOWN GROSS RECEIPTS OF RS. 81.01 LACS ON WHICH GROSS PROFIT WAS SHOWN AT RS. 36.67 LACS AND NET PROFIT AT RS. 6 .27 LACS. THE CLOSING STOCK WAS SHOWN AT RS. 90.62 LACS. THE A.O. ALSO NOTICED THAT THE ASSESSEE HAS MADE VARIOUS PROVISIONS IN THE BALANCE SHEET WITH REGARD TO DEVELOPMENT OF LAND. THE ASSESSEE WAS ASKED TO RECAST HIS TRADING ACCOUN T ON THE BASIS OF ACTUAL PAYMENTS MADE EXCLUDING THE PROVISIONS. IN ITS RE-C ASTED TRADING ACCOUNT, THE VALUE OF CLOSING STOCK WAS SHOWN AT RS. 59,60,751/- . THE A.O. FOUND THAT AFTER RE-CASTING THE TRADING ACCOUNT THE GROSS PROFIT INC REASED BY RS. 13.32 LACS. THE A.O. ACCORDINGLY MADE THE ADDITION OF RS. 13.32 LAC S TO THE INCOME OF THE ASSESSEE. 16. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT MUCH SUCCESS. 17. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT SINCE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING ALL ASCER TAINED LIABILITIES WERE DEBITED TO THE TRADING ACCOUNT AND THEREFORE THERE IS NO ME RIT IN THE ADDITION OF RS. 13.32 LACS. PER CONTRA, THE LD. D.R. STRONGLY SUPPO RTED THE FINDINGS OF THE A.O. 18. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW. IT IS NOT IN DISPUTE THAT AS PER THE AUDIT REPORT, THE CLOSING S TOCK IS SHOWN AT RS. 90.62 LACS AND THE GROSS PROFIT AT RS. 36.67 LACS. AT THE INST ANCE OF THE A.O., THE ASSESSEE RE-CASTD ITS TRADING ACCOUNT EXCLUDING THE PROVISIO N FOR EXPENDITURE AND THE VALUE OF CLOSING STOCK WAS RS. 59.60 LACS AND THE G ROSS PROFIT BECAME 49.99 LACS. WITHOUT EXAMINING THE NATURE OF THE PROVISIONS OF E XPENDITURE MADE BY THE ITA NOS. 03 & 05/RPR/2013 . A.Y. 2008-09 6 ASSESSEE, THE A.O. HAS SIMPLY MADE THE ADDITION OF RS. 13.32 LACS. FINDING THAT THE RE-CASTED TRADING ACCOUNT, THE GROSS PROFIT INC REASES. WITHOUT REALIZING THAT THE DIRECT EXPENSES CLAIMED AT RS. 1.14 CRORES WERE REDUCED TO RS. 68.09 LACS WHEN THE PROVISIONS FOR THE ASCERTAINED LIABILITY W ERE EXCLUDED. IN OUR CONSIDERED OPINION, THE ACTION OF THE A.O. IS WITHO UT ANY BASIS AND THEREFORE THE ADDITION OF RS. 13.32 LACS DESERVE TO BE DELETE D. WE DIRECT ACCORDINGLY. THIS GROUND IS ALLOWED. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO. 05/BLPR/2013 REVENUES APPEAL. 20. IN REVENUES APPEAL, THE GRIEVANCE RELATED TO THE R ELIEF OF RS. 20.09 LACS GIVEN BY THE CIT(A). THE TAX EFFECT IS AT RS. 6.02 LACS AND THEREFORE THIS APPEAL BY THE REVENUE HAS TO BE DISMISSED IN THE LIGHT OF THE CBD T CIRCULAR NO. 21 OF 2015 DATED 10.12.2015. 21. IN THE LIGHT OF THE SAID CIRCULAR, THIS APPEAL BY T HE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 16 - 04- 20 18 SD/- SD/- (RAM LAL NEGI) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER RAIPUR: DATED 16/04/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)