Kishor Tarachand Jain, Dhule V. Income-tax Officer,

ITA 332/PUN/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1088 (ITAT-PUNE)
• Duration Of Justice: 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 03-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR CHAWARE
• Assessee Lawyers: K SRINIVASAN
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Cost of acquisition
• Section: 50C; 2(14)

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 332 /PN/201 6 / ASSESSM ENT YEAR : 20 11 - 12 SHRI KISHOR TARACHAND JAIN, NEHRU ROAD, SHIRPUR, DIST. DHULE - 425405 . / APPELLANT PAN: AALPJ5762B VS. THE INCOME TAX OFFICER , WARD 3(1), DHULE . / RESPONDENT . / ITA NO. 33 3 /PN/201 6 . / ITA NO. 33 3 /PN/201 6 / ASSESSMENT YEAR : 20 11 - 12 SHRI AGRAWAL TARACHAND KISANLAL , BANK LANE SHIRPUR, DIST. DHULE - 425405 . / APPELLANT PAN: AA VPA1901D VS. THE INCOME TAX OFFICER, WARD 3(1), DHULE . / RESPONDENT / APPELLANT BY : SHRI K. SRINIVASAN / RESPONDENT BY : SHRI ANIL KUMAR CHAWARE / DATE OF HEARING : 1 7 . 0 8 .201 6 / DATE OF PRONOUNCEMENT: 17 . 0 8 .201 6 ITA NO S . 332 & 333 /PN/20 1 6 SHRI KISHOR TARACHAND JAIN & ANR. 2 / ORDER PER SUSHMA CHOWLA, J M : BOTH THE APPEAL S FILED BY DIFFERENT ASSESSEE S ARE AGAINST SEPARATE ORDER S OF CIT (A) - 1 , NASHIK , BOTH DATED 11 . 1 2 .20 1 5 RELATING TO ASSESSMENT YEAR 20 11 - 12 AGAINST RESPECTIVE ORDER S PASSED UNDER SECTION 1 43(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT ) . 2 . BOTH THE APPEALS ON SIMILAR ISSUES WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, REFERENCE IS BEING MADE TO THE FACTS IN ITA NO.332/PN/2016 TO ADJUDICATE THE ISSUE. 3. THE ASSESSEE I N ITA NO.332/PN/2016 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW: A . THE A O ERRED IN COMPUTING CAPITAL GAIN AND CIT(A) CONFIRMED WHEN THE ASSET SOLD IS NOT CAPITAL ASSET AS PER SECTION 2(14) OF IT A CT, 1961 BEING AGRICULTURAL LAND AND SAME MAY BE DELETED. B . WITHOUT PREJUDICE TO ABOVE CONTENTION, A O HAS ERRED IN INVOKING PROVISION OF SEC. 50 C WITHOUT APPLYING DUE PROCESS OF LAW VIZ. REFERRING TO VALUATION OFFICER AND TAKING THE MARKET VALUE AS DETERMIN ED BY THE VALUATION OFFICER. C . THE CIT(A) ERRED IN ENHANCING THE INCOME ASSESSED AND GIVING DIRECTIONS TO COMPUTE INCOME AS BUSINESS INCOME WITHOUT REALISING THAT PROVISIONS OF SECTION 50 C HAS NO APPLICATION IN RESPECT OF BUSINESS/PROFESSION INCOME. THE ORD ER OF A O AND CIT(A) ARE THEREFORE BAD IN LAW AND MAY BE VACATE AND MAY DIRECTED TO ACCEPT THE RETURNED INCOME OR SUCH OTHER RELIEF AS CONSIDERED JUST MAY BE GIVEN. 2. THE A O AND CIT(A) ORDERS MAY BE VACATED AND SUITABLE DIRECTIONS ISSUED TO COMPUTE INCOM E IN ACCORDANCE WITH LAW. ITA NO S . 332 & 333 /PN/20 1 6 SHRI KISHOR TARACHAND JAIN & ANR. 3 4. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN ASSESSING THE GAIN ARISING ON SALE OF AGRICULTURAL LAND AS INCOME FROM BUSINESS AND ALSO IN APPLYING THE PROVISIONS OF SECTION 50C OF THE ACT. 5. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THOUGH SEVERAL GROUNDS OF APPEAL HAVE BEEN RAISED WITH REGARD TO COMPUTATION OF CAPITAL GAINS IN THE HANDS OF ASSESSEE, HOWEVER, THE LIMITED ISSUE WHICH NEEDS TO BE ADJUDICATED IS THAT ONCE THE GAIN ARISING ON SALE OF AGRICULTURAL LAND IS ASSESSED AS INCOME FROM BUSINESS, THEN THE PROVISIONS OF SECTION 50C OF THE ACT HAVE NO APPLICATION. 6. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD DECLARED INCOME OF RS. 2,56,492/ - . THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ON THE BASIS OF AIR INFORMATION ABOUT THE TRANSACTION OF IMMOVABLE PROPERTY. THE ASSESSING OFFICER OBSERVED THAT THE MAIN ISSUE ARISING IN THE CASE WAS ABOUT THE APPLICABILITY OF PROVISIONS OF CAPITAL GAINS IN RESPECT OF LAND AND ALSO THE APPLICABILITY OF PROVISIONS OF SECTION 50C OF THE ACT. THE ASSESSEE ALONG WITH TWO OTHER PERSONS OF HAVING EQUAL SHARE HAD SOLD LAND IN SURVEY NO.131/2 OF AMODE IN SHIRPUR TALUKA, ADMEASURING 2H 33R FOR SALE CONSIDERA TION OF RS.15,71,000/ - . HOWEVER, STAMP DUTY VALUATION AUTHORITY FIXED THE VALUE AT RS. 1,21,44,000/ - AND STAMP DUTY THEREON AT RS. 4,85,760/ - WAS PAID. THE COST OF LAND PURCHASED ON 19.06.1999 BY THREE PERSONS WAS FOR RS. 7,50,000/ - . THE ASSESSING OFFICER NOTED THAT THERE WAS SAUDA PAVTI PREPARED BETWEEN THE PARTIES WHICH WAS NOT SIGNED BY THE PARTIES AND WAS ALSO NOT REGISTERED WITH THE SUB - REGISTRAR. HOWEVER, IT TALKS OF ENCROACHMENT BY ONE MR. MONGAL SINGH DAULAT SINGH RAJPUT AND IT ALSO MENTIONED THAT THE FINAL POSSESSION WOULD BE GIVEN AT THE TIME OF EXECUTION OF SALE DEED. THE ITA NO S . 332 & 333 /PN/20 1 6 SHRI KISHOR TARACHAND JAIN & ANR. 4 ASSESSING OFFICER WAS OF THE VIEW THAT THE INCOME FROM LONG TERM CAPITAL GAINS IS TO BE WORKED OUT BY ADOPTING THE VALUE OF CONSIDERATION TAKEN FOR THE PURPOSE OF STAMP DUTY I. E. AT RS.1.21 CRORES AS STIPULATED IN SECTION 50C OF THE ACT. THE CONTENTION OF ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT THE AGRICULTURAL LAND SOLD BY THE ASSESSEE WAS NOT A CAPITAL ASSET AND ALSO PROVISIONS OF SECTION 50C OF THE ACT WERE NOT APPLIC ABLE. THE ASSESSING OFFICER REJECTED BOTH THE CONTENTIONS OF ASSESSEE AND RE - COMPUTED THE INCOME FROM CAPITAL GAINS BY TAKING THE SALE PRICE AT RS.1.21 CRORES AND AFTER ALLOWING THE INDEXED COST OF ACQUISITION, COMPUTED THE NET CAPITAL GAIN AT RS.1.07 CRO RES. THE SHARE OF THE ASSESSEE WAS WORKED OUT AT RS. 35,72,782/ - WHICH WAS ASSESSED IN THE HANDS OF ASSESSEE. 7. THE CIT(A) DURING THE COURSE OF APPELLATE PROCEEDINGS REJECTED THE PLEA OF ASSESSEE THAT THE AGRICULTURAL LAND SOLD BY THE ASSESSEE WAS NOT A CAPITAL ASSET. IT WAS HELD BY THE CIT(A) THAT SINCE THE LAND WAS SITUATED WITHIN 8 KILOMETERS OF MUNICIPAL LIMITS AND SINCE NO AGRICULTURAL ACTIVITIES WERE CARRIED ON BY THE ASSESSEE, THE INVESTMENT WAS WITH PROF IT MOTIVE AND QUESTION WHICH HAS TO BE AN SWERED WAS THAT THE GAINS ARISING ON THE SAME IS TO BE TAXED UNDER THE HEAD CAPITAL GAINS OR UNDER THE HEAD INCOME FROM BUSINESS. AFTER CONSIDERING THE INTENTION OF THE ASSESSEE IN MAKING INVESTMENT AND NATURE OF TRANSACTION, WHETHER A TRADER OR INVES TOR, THE CIT(A) GAVE A SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY INCOME SHOULD NOT BE ENHANCED IN THE HANDS OF ASSESSEE BY TREATING THE SAID GAIN AS INCOME FROM BUSINESS. THE ASSESSEE FILED REPLY TO THE SAID SHOW CAUSE NOTICE. HOWEVER, REJECTING THE CONTENTION OF ASSESSEE, THE CIT(A) HELD THAT THE INCOME FROM SALE OF LAND IS TO BE ASSESSED AS INCOME FROM BUSINESS. THE GAIN AS WORKED OUT BY THE ASSESSING OFFICER BY ITA NO S . 332 & 333 /PN/20 1 6 SHRI KISHOR TARACHAND JAIN & ANR. 5 APPLYING THE PROVISIONS OF SECTION 50C OF THE ACT WAS ASSESSED AS INCOME FROM BUSINE SS IN THE HANDS OF ASSESSEE AT RS. 37,88,000/ - . 8. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 9. THE LIMITED ISSUE WHICH ARISES FOR ADJUDICATION BEFORE THE TRIBUNAL IS THAT WHERE THE GAIN ARISING FROM SALE OF LAND IS ASSESSED IN THE HANDS OF A SSESSEE AS INCOME FROM BUSINESS, CAN THE PROVISIONS OF SECTION 50C OF THE ACT BE APPLIED IN ORDER TO DETERMINE THE SAID INCOME. ON PERUSAL OF RECORD AND THE LIMITED ISSUE RAISED IN THE PRESENT APPEAL, IT IS CLEAR THAT THE ASSESSEE HAD SOLD AGRICULTURAL LAND AND THE GAIN ARISING THEREFROM WAS CLAIMED TO BE EXEMPT FROM CAPITAL GAINS HOLDING THAT THE SAID ASSET SOLD BY THE ASSESSEE WAS OUTSIDE THE PURVIEW OF DEFINITION OF CAPITAL ASSET. THE SAID PLEA OF THE ASSESSEE HAS NOT BEEN ACCEPTED BY EITHER OF THE A UTHORITIES BELOW. THE ASSESSING OFFICER HAD COMPUTED THE INCOME FROM CAPITAL GAINS IN THE HANDS OF ASSESSEE BY APPLYING THE PROVISIONS OF SECTION 50C OF THE ACT AS AGAINST THE SALE CONSIDERATION OF RS. 15,71,000/ - , WHICH WAS FIXED BETWEEN THE PARTIES AS PE R SALE DEED DATED 18.08.2010, THE STAMP DUTY VALUATION BY THE SAID AUTHORITIES WAS AT RS. 1.21 CRORES. THE ASSESSING OFFICER HAD APPLIED THE PROVISIONS OF SECTION 50C OF THE ACT AND ADOPTED THE SALE CONSIDERATION AT RS.1.21 CRORES AND WORKED OUT THE SHARE OF ASSESSEE IN THE GAIN ARISING ON SALE OF AGRICULTURAL LAND AT RS. 35,72,782/ - . THE CIT(A) ON THE OTHER HAND, WAS OF THE VIEW THAT THE SAID INCOME IS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. THE REVENUE IS NOT IN APPEAL AGAINST THE SAID ENHANCEMENT CARRIED OUT BY THE CIT(A) AFTER GIVING REQUISITE NOTICE TO THE ASSESSEE. THE PLEA OF THE ASSESSEE BEFORE THE TRIBUNAL IS THAT THE SAID INCOME BE ASSESSED AS INCOME FROM BUSINESS IN VIEW OF VARIOUS DECISIONS OF PUNE BENCH OF TRIBUNA L , SINCE NO ITA NO S . 332 & 333 /PN/20 1 6 SHRI KISHOR TARACHAND JAIN & ANR. 6 AGRICULTURAL ACTIVITIES WERE CARRIED ON BY THE ASSESSEE. HOWEVER, ONCE THE INCOME IS ASSESSED AS BUSINESS INCOME, THEN THE PROVISIONS OF SECTION 50C OF THE ACT ARE NOT TO BE APPLIED FOR ADOPTING THE SALE CONSIDERATION IN THE HANDS OF ASSESSEE. I FIND MERIT IN THE PLEA OF ASSESSEE IN THIS REGARD THAT WHERE THE INCOME IS BEING ASSESSED IN THE HANDS OF ASSESSEE AS INCOME FROM BUSINESS, THEN FOR COMPUTING THE SAID INCOME, THE SALE CONSIDERATION AS SUCH HAS TO BE ADOPTED AND AFTER ALLOWING THE CO ST OF ACQUISITION OF SAID PROPERTY, THE BALANCE PROFIT / GAIN IS TO BE ASSESSED IN THE HANDS OF ASSESSEE AS INCOME FROM BUSINESS. THE PROVISIONS OF SECTION 50C OF THE ACT ARE TO BE APPLIED WHEN THE INCOME IS TO BE COMPUTED UNDER THE HEAD INCOME FROM CA PITAL GAINS UNDER CHAPTER IV OF THE ACT. IN CASE THE INCOME IS BEING ASSESSED AS INCOME FROM BUSINESS, TH EN THERE IS NO MERIT IN APPLYING THE PROVISIONS OF SECTION 50C OF THE ACT. IN THIS REGARD, I FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE MADRAS HIGH COURT IN CIT VS. THIRUVENGADAM INVESTMENTS P. LTD . (2010) 320 ITR 345 (MAD) , WHEREIN IT WAS HELD AS UNDER: - HELD, DISMISSING THE APPEAL, THAT SINCE THE PROPERTY IN THE HANDS OF THE ASSESSEE WAS TREATED AS A BUSINESS ASSET AND NOT AS A CAPITAL ASSET, THERE WAS NO QUESTION OF INVOKING THE PROVISIONS OF SECTION 50C WHICH PERTAINS TO DETERMINING THE FULL VALUE OF THE CAPITAL ASSET. THE TRIBUNAL HAD COME TO THE CORRECT CONCLUSION. 10. IN VIEW THEREOF, THE FINDING OF CIT(A) IS REVERSED TO THE EXTE NT OF COMPUTATION OF INCOME FROM BUSINESS. HOWEVER, THE FINDING OF CIT(A) IN ASSESSING THE INCOME FROM GAIN ON SALE OF AGRICULTURAL LAND TO BE ASSESSED AS INCOME FROM BUSINESS IS UPHELD. THE ASSESSING OFFICER IS THUS, DIRECTED TO RE - COMPUTE THE INCOME IN THE HANDS OF ASSESSEE AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. ITA NO S . 332 & 333 /PN/20 1 6 SHRI KISHOR TARACHAND JAIN & ANR. 7 11. THE FACTS AND ISSUE IN ITA NO.333/PN/2016 ARE IDENTICAL TO THE FACTS AND ISSUE IN ITA NO.332/PN/2016 AND THE DECISION IN ITA NO.332/PN/2016 SHALL APPLY MUTATIS MUTANDIS TO ITA NO.333/PN/2016. 1 2 . IN THE RESULT, BOTH THE APPEAL S OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 17 TH DAY OF AUGUST , 201 6 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 17 TH AUGUST , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPO NDENT; 2. / THE RESPO NDENT; 3. ( ) / THE CIT(A) - 1 , NASHIK ; 4. / THE PR. CIT - 1 , NASHIK ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE