M/S. ANAND SAGAR REAL ESTATES PVT. LTD., Indore V. THE CIT-1, Indore

ITA 336/IND/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8424 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-12-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 20-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: ARPIT GOUR CAS
• Keywords: Capital asset; Business income; Cost of acquisition; Capital receipt
• Section: 143(3); 263

Judgement Text

ITA NO.336/IND/2015 M/S. ANAND SAGAR REAL ESTATES PVT. LTD., INDORE , , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCHE, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.336/IND/2015 ASSESSMENT YEAR: 2010-11 / VS. M/S. ANANDSAGAR REAL ESTATES PVT. LTD. ANIL KAMAL GARG& COMPANY, CHARTERED ACCOUNTANTS, 97, JAORA COMPOUND INDORE (MP)-452001 (APPELLANT) CIT - I INDORE (REVENUE ) P.A. NO. AAGCA4078F APPELLANT BY SHRI ANIL KAMAL GARG & ARPIT GOUR, CAS. REVENUE BY SMT. ASHIMA GUPTA , CIT - DR DATE OF HEARING: 10.12.2018 DATE OF PRONOUNCEMENT: 02.01.2019 / O R D E R PER KUL BHARAT, J.M: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-I, INDORE, DATED 31.03.2015PERTAINING TO T HE A.Y. ITA NO.336/IND/2015 M/S. ANAND SAGAR REAL ESTATES PVT. LTD., INDORE 2 2010-11. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: GROUNDS OF INCOME-TAX APPEAL BEFORE THE HON'BLE IN COME-TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE, AGAINST THE ORDER P ASSED BY THE COMMISSIONER OF INCOME- TAX-I, INDORE, U/S. 263 OF THE INCOME-TAX ACT, 1961, PERTAINING TO THE ASSESSMENT YEAR 2010-11. 1(A). THAT, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LEARNED CIT GROSSLY ERRED IN INVOKING THE PROVISIONS OF SEC TION 263 OF THE INCOME- TAX ACT, 1961 IN THE APPELLANT'S CASE WITHOUT CONSI DERING THE MATERIAL FACT THAT THE ASSESSMENT ORDER PASSED BY THE LEARNED ASS ESSING OFFICER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F THE REVENUE. (B). THAT, THE LEARNED CIT GROSSLY ERRED, BOTH ON F ACTS AND IN LAW, IN ASSUMING THE JURISDICTION U/S. 263 OF THE INCOME-TA X ACT, 1961 WITHOUT CONSIDERING THE MATERIAL FACT THAT DURING THE COURS E OF THE ASSESSMENT PROCEEDINGS, THE APPELLANT HAD BROUGHT ON RECORD AL L THE MATERIALS AND EVIDENCES RELATING TO THE CONCERNING ISSUES AND THE SAME WERE DULY VERIFIED BY THE AO AFTER PROPER APPLICATION OF HIS MIND. 2. THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LEARNE D CIT GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN SETTING ASIDE THE ASSESSMEN T ORDER PASSED BY ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOM E-TAX ACT, 1961 MERELY FOR CONDUCTING MORE ENQUIRIES WITHOUT FIRST FORMING ANY OPINION THAT THE ORIGINAL ASSESSMENT ORDER PASSED BY THE AO WAS PREJ UDICIAL TO THE INTEREST OF THE REVENUE. 3. THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LEARNE D CIT GROSSLY ERRED IN GIVING A DIRECTION TO THE AO TO MAKE FRESH ENQUIRY AND INVESTIGATION ON CERTAIN ISSUES IN RESPECT OF WHICH THE ASSESSING OF FICER PASSING THE ORDER HAD ALREADY FORMED CERTAIN OPINION AFTER PROPER APP LICATION OF MIND. 4. THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LEARNE D CIT GROSSLY ERRED IN NOT CONSIDERING THE SETTLED POSITION OF LAW FACT THAT T HERE IS NO EMBARGO IN THE SCHEME OF THE INCOME-TAX ACT, 1961 THAT ONE ASSESSE E CAN SIMULTANEOUSLY BE AN INVESTOR AND AS ALSO A TRADER IN REAL ESTATE. ITA NO.336/IND/2015 M/S. ANAND SAGAR REAL ESTATES PVT. LTD., INDORE 3 2. BRIEFLY STATED THE FACTS ARE THAT IN THIS CASE THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER VIDE ORDER DATED 22.03.2013 U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) ASSESSING TOTAL INCOME OF RS.9,02,74,441/-. SUBSEQUENTLY, THE LD. CIT(A) AF TER EXAMINING THE RECORDS FOUND THAT THE ASSESSMENT HAS BEE N FRAMED WITHOUT APPLYING MIND AND MAKING INVESTIGATION O N THE ISSUES WHICH RESULTED INTO THE ORDER BEING ERRO NEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, NOTICE U/S 263 OF THE ACT WAS ISSUED TO THE ASSESSEE CALLING UPON AS TO WHY THE ASSESSMENT SO FRAMED MAY NOT BE REVISED. THE BASIS OF THE ISSUING NOTICE WAS THAT DURING THE ASSESSMENT YEAR 2010-11 THE ASSESSEE HAD SO LD 8.683 HECTARE LAND SITUATED AT VILLAGE GOKANYA ON 21.08.2009 FOR RS.4,50,55,500/-. THE LAND WAS PURCHASE D ON 06.09.2008 FOR THE PURCHASE CONSIDERATION OF RS.69,71,440/- AND REGISTRY EXPENSES OF RS.6,74,158/ -. ITA NO.336/IND/2015 M/S. ANAND SAGAR REAL ESTATES PVT. LTD., INDORE 4 THUS, THE TOTAL COST OF LAND WAS WORKED OUT AT RS.76,45,598/- AND LONG TERM CAPITAL GAIN WAS WORKED OUT AT RS.3,74,09,902/-. THE ASSESSEE COMPANY CLAIMED THIS PROFIT AS EXEMPT ON THE PLEA THAT THE AGRICULTURAL LAND S O SOLD WAS OUT OF THE AMBIT OF DEFINITION OF THE CAPITAL ASSETS U/S 2(14)(III) OF THE ACT. IT WAS OBSERVED BY THE LD . CIT(A) THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE H AD ALSO SOLD AGRICULTURAL LAND SITUATED AT VILLAGE GOKANYA HELD AS STOCK IN TRADE AT RS.14,43,52,000/- ON WHICH TRADING PROFIT OF RS.5,41,34,250/- WAS WORKED OUT WHICH WAS INCLUDED IN THE PROFIT ON SALE OF AGRICULTURAL LAND SHO WN IN PROFIT & LOSS ACCOUNT AT RS.9,91,89,750/-. IN RESPON SE TO THE NOTICE ISSUED, ASSESSEE FILED A DETAILED REPLY HOW EVER THE LD. CIT(A) DID NOT FOUND THE REPLY OF THE ASSESS EE AS SATISFACTORY HENCE HE REVISED THE ASSESSMENT ORDER BY SETTING ASIDE THE ASSESSMENT ORDER FOR FRAMING ASSESSME NT ORDERS, AFRESH IN THE LIGHT OF THE OBSERVATIONS MADE IN THE ITA NO.336/IND/2015 M/S. ANAND SAGAR REAL ESTATES PVT. LTD., INDORE 5 IMPUGNED ORDER. AGAINST THIS THE ASSESSEE IS IN PRESE NT APPEAL. 3. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED TH AT THE IMPUGNED ORDER IS UNJUSTIFIED AND IS CONTRARY TO LAW. LD. COUNSEL SUBMITTED THERE IS NO EMBARGO UNDER THE LAW FOR KEEPING TWO PORTFOLIO. HE SUBMITTED THAT MERELY BECAUSE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE WOULD NOT PREVENT HIM FROM KEEPING PART OF LAND AS INVESTME NT. LD. COUNSEL LAID GREAT EMPHASIS ON SUBMISSION THAT THI S PART OF LAND WAS KEPT FOR ESTABLISHING A PROJECT OF WATER PARK BUT DUE TO PAUCITY OF WATER THIS IDEA WAS DROPPED AND LAND WAS KEPT AS INVESTMENT. HE SUBMITTED THAT AUTHORITI ES BELOW HAVE WRONGLY APPRECIATED THE FACTS. LD. COUNSEL MADE WRITTEN SUBMISSION IN RESPONSE TO THE QUERY OF T HE BENCH. THE CONTENTIONS THEREOF ARE AS UNDER: THIS HAS A REFERENCE TO THE HEARING IN THE CASE OF THE CAPTIONED APPELLANT HAD BY YOUR HONOURS ON 20-11-2018. DURING THE COURS E OF THE HEARING, IT WAS SUBMITTED BY THE UNDERSIGNED THAT DUE TO CLERIC AL ERROR, ENTIRE PURCHASE COST OF THE AGRICULTURAL LAND, ADMEASURING 16.782 HECTARES GOT ADJUSTED AGAINST THE PARTIAL SALE OF 8.099 HECTARES OF LAND SOLD IN THE ITA NO.336/IND/2015 M/S. ANAND SAGAR REAL ESTATES PVT. LTD., INDORE 6 EARLIER FMANCIAL YEAR RELEVANT TO A.Y. 2009-10. IT WAS SUBMITTED THAT DUE TO SUCH CLERICAL ERROR, VALUE OF THE UNSOLD LAND AT RS.76,45,598/-, WHICH OUGHT TO HAVE BEEN SHOWN IN THE BALANCE SHEET AS OF 31-03-2009, HAD GOT ESCAPED TO BE SHOWN AS SUCH. UPON MAKING SUCH ARGUMENT, THIS HON'BLE BENCH SPECIFICALLY SOUGHT THE CLARIFICATION FROM TH E UNDERSIGNED AS TO WHETHER OR NOT SUCH CLERICAL ERROR WAS BROUGHT TO T HE NOTICE OF THE THEN AO DURING THE COURSE OF THE ORIGINAL ASSESSMENT PRO CEEDINGS. YOUR HONOURS, BRIEFLY STATED, THE CASE OF THE APPEL LANT IS THAT IN ITS CASE, THE LD, CIT WAS NOT JUSTIFIED IN ASSUMING THE JURIS DICTION UNDER S.263 OF THE INCOME- TAX ACT, 1961 ON THE ISSUE OF TREATMENT OF SURPLUS ARISING ON SALE OF CERTAIN AGRICULTURAL LAND TO THE APPELLANT DURING THE RELEVANT PREVIOUS YEAR. THE APPELLANT CLAIMS THAT IT HAD PUR CHASED 16.782 HECTARES AGRICULTURAL LAND FOR A TOTAL CONSIDERATIO N OF RS.L,4 7,76,9701- [INCLUDING REGISTRATION COST] DURING THE PREVIOUS Y EAR RELEVANT TO A.Y. 2009-10 AND OUT OF SUCH PURCHASES, IT HAD SOLD AGRI CULTURAL LAND ADMEASURING 8.099 HECTARES IN THE SAME FINANCIAL YE AR I.E. THE FINANCIAL YEAR RELEVANT TO A.Y. 2009-10. IT HAS BEEN CLAIMED BY THE APPELLANT THAT REMAINING 8.683 HECTARES AGRICULTURAL LAND WAS SOLD BY IT DURING THE PREVIOUS YEAR RELEVANT TO A. Y. 2010-11 AND SURPLUS ARISING ON SUCH SALE WAS TREATED BY IT AS CAPITAL RECEIPTS. SINCE THE LA ND WAS NOT FALLING WITHIN THE DEFINITION OF THE EXPRESSION 'CAPITAL AS SETS' UNDER S.2(L4) OF THE ACT BEING OUT OF THE PRESCRIBED LIMIT OF THE MUNICI PAL LIMIT, THE ENTIRE CAPITAL RECEIPT WAS CLAIMED AS EXEMPTED. IT HAS ALS O BEEN CLAIMED BY THE APPELLANT THAT IN THE ORIGINAL ASSESSMENT PROCEEDIN GS UNDER S.143(3), THE AO HAD RAISED SPECIFIC QUERY ON THE ISSUE OF CLAIM OF EXEMPTION, BY WAY OF ISSUANCE OF TWO NOTICES WHICH ARE PLACED ON RECO RD AT PAGE NO. 35 & 40 OF THE PAPER BOOK. IT IS ALSO BEING CLAIMED BY T HE APPELLANT THAT THE FULL DETAILS ALONG WITH THE DOCUMENTARY EVIDENCES W ERE DULY FURNISHED BY THE APPELLANT VIDE ITS LETTERS WHICH ARE PLACED AT PAGE NO. 52 TO 55 & 68 TO 72 OF THE PAPER BOOK. IT WAS ALSO DEMONSTRATE D BEFORE THE HON'BLE BENCH THAT THE AO AFTER MAKING NECESSARY VE RIFICATION, HAD FOUND THE CLAIM OF THE APPELLANT AS GENUINE AND A S PECIFIC FINDING TO THIS EFFECT WAS GIVEN BY HIM AT PARA (2) OF HIS ASSESSME NT ORDER. THE HON'BLE BENCH THEN WANTED TO KNOW ABOUT THE TREATMENT OF TH E UNSOLD AGRICULTURAL LAND IN THE BALANCE SHEET FOR THE EARL IER YEAR. IT WAS SUBMITTED THAT DUE TO CLERICAL ERROR, THE ENTIRE VA LUE OF PURCHASE WAS CLAIMED AS EXPENSE INSTEAD OF CLAIMING ONLY PROPORT IONATE VALUE AS EXPENSE AND SHOWING THE REMAINING IN THE BALANCE SH EET. IT WAS SHOWN THAT IT WAS A CLERICAL ERROR HAVING NO IMPACT ON TH E TAXABLE INCOME OF THE APPELLANT FOR ANY OF THE YEARS. THEREAFTER, THIS HO N'BLE BENCH RAISED THE QUERY AS MENTIONED IN THE FIRST PARA ABOVE. NOW, IN RESPECT OF THE SPECIFIC QUERY RAISED BY THE HON'BLE BENCH, IT IS RESPECTFULLY SUBMITTED THAT DURING THE COURSE OF THE ORIGINAL ITA NO.336/IND/2015 M/S. ANAND SAGAR REAL ESTATES PVT. LTD., INDORE 7 ASSESSMENT PROCEEDINGS, THE LD. AO VIDE POINT NO.L0 (A) OF HIS NOTICE UNDER S.142(1) DATED 09-11-2012 [PLACED AT PAGE NO. 35 OF THE PAPER BOOK], ASKED THE APPELLANT TO FURNISH THE JUSTIFICA TION OF THE PROFIT ON SALE OF LAND AT RS.9,91,89,750/- SHOWN IN THE PROFIT & LOSS ACCOUNT. IN RESPONSE TO SUCH QUERY, THE APPELLANT, VIDE ITS COU NSEL'S LETTER DATED 03-01-2013 [PAGE NO. 52 OF PAPER BOOK], FURNISHED T HE COMPLETE DETAILS. IT WAS EXPLICITLY MADE CLEAR THAT OUT OF T HE PROFIT OF RS.9,91,89,750/- SHOWN IN THE PROFIT & LOSS ACCOUNT, RS.5,41,34,250/- WAS A BUSINESS PROFIT AND A SUM OF RS.3,74,09,902/- WAS CLAIMED AS SURPLUS ON SALE OF AGRICULTURAL LAND HELD AS INVEST MENT. IT WAS ALSO SPECIFICALLY MENTIONED THAT THE REMAINING SUM OF RS.76,45,598/- WAS THE PRIOR PERIOD PROFIT, BEING CAPITAL GAIN, ON SAL E OF AGRICULTURAL LAND HELD AS INVESTMENT RELEVANT TO A.Y. 2009-10. BEFORE THE AO, THE ISSUE WAS FURTHER CLARIFIED, AT LENGTH, AT PARA (V) OF PO INT NO.L0 OF THE AFORESAID SUBMISSION LETTER DATED 03-01-2013 [KINDL Y REFER PB PAGE NO. 53]. FURTHER, A REVISED WORKING OF THE GAIN FOR THE A.Y. 2009-10 WAS ALSO FILED BEFORE THE ID. AO. A COPY OF THE SAME IS ALSO PLACED AT PAGE NO. 84 OF OUR PAPER BOOK IN SUM AND SUBSTANCE, IT IS HUMBLY SUBMITTED THAT D URING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS, ALL THE RELEVANT I SSUES WERE DULY DISCUSSED BY THE LD. AO, WHICH INTER ALIA, INCLUDES THE ISSUE OF RS.76,45,598/- AS RAISED BY THE HON'BLE BENCH. IN T HESE CIRCUMSTANCES, IT IS ONCE AGAIN PRAYED THAT THE ORDER SO PASSED BY TH E LD. CIT UNDER S.263 OF THE ACT DESERVES TO BE QUASHED. 4. LD. CIT-DR OPPOSED THE SUBMISSIONS AND SUPPORTED THE ORDER OF THE AUTHORITY BELOW. HE SUBMITTED THAT T HE AO IN THE ORIGINAL ASSESSMENT PROCEEDING GROSSLY ERRED I N MAKING INQUIRY RELATED TO SALE OF LAND IN QUESTION. HE CONTENDED THAT THE AO MECHANICALLY ACCEPTED THE REPLY WITHOUT MAKING EFFORTS TO DIG OUT THE FACTS. THUS, T HIS HAS ITA NO.336/IND/2015 M/S. ANAND SAGAR REAL ESTATES PVT. LTD., INDORE 8 CAUSED THE ASSESSMENT ORDER BEING ERRONEOUS SO FAR IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORDS AND GONE THROUGH THE ORDER S OF THE AUTHORITIES BELOW. LAW IS WELL SETTLED THAT T HE LD. CIT CAN INVOKE PROVISIONS OF SECTION 263 OF THE ACT AND REVISE THE ASSESSMENT FRAMED BY THE A.O., IF HE IS SAT ISFIED THAT THE ORDER PASSED IS ERRONEOUS SO FAR AS IT IS PREJ UDICIAL TO THE INTEREST OF THE REVENUE. IN THE PRESENT CASE , LD. CIT HAS REVISED THE CONCLUDED ASSESSMENT BY SETTING ASIDE ASSESSMENT TO THE A.O. FOR DE-NOVO ASSESSMENT. IT IS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT TH E ASSESSEE CAN HAVE TWO PORTFOLIOS, ONE IS IN THE NATURE OF INVESTMENT, ANOTHER BEING BUSINESS. THE ASSESSEE IS ENGAGED IN BUSINESS OF REAL ESTATE. THE LD. CIT IN TH E IMPUGNED ORDER HAS OBSERVED THAT THE SALE OF LAND IN TH E SAME LOCALITY IS TREATED AS THE BUSINESS RECEIPTS. HO WEVER, ITA NO.336/IND/2015 M/S. ANAND SAGAR REAL ESTATES PVT. LTD., INDORE 9 IN RESPECT OF THE LAND IN QUESTION, THE ASSESSEE HAS CL AIMED IT AS AN INVESTMENT. FURTHER, THE ASSESSEE CLAIMED IT AS EXEMPT BEING AN AGRICULTURAL LAND. IN THE OPINION OF T HE LD. CIT, A.O. HAD NOT CARRIED OUT ENQUIRY RELATED TO TREATMENT OF THE SALE PRICE OF THE SAID LAND. IT IS CO NTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT LAND IN QUEST ION WAS NOT PART OF STOCK IN TRADE AS THE ASSESSEE WANTED TO ESTABLISH A WATER PARK. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE CONTENTION OF THE REPRESENTATIV ES OF THE PARTIES. WE ARE UNABLE TO ACCEPT THIS CONTENTION THAT ASSESSING OFFICER HAD RAISED A SPECIFIC QUERY AS TO WHY T HE ASSESSEE HAS TREATED SALE CONSIDERATION AS EXEMPT. THE LD. CIT HAS ALSO NOT DEALT WITH THE CONTENTION THAT THE ASSESSEE WANTED TO ESTABLISH A WATER PARK. UNDER THESE FACTS, WE DEEM IT PROPER TO MODIFY THE DIRECTION OF THE LD. CIT AND DIRECT THE A.O. TO MAKE ENQUIRY, WHETHER THE ASSESSEE HAD MADE ANY EFFORTS TO ESTABLISH A WATER PARK ON ITA NO.336/IND/2015 M/S. ANAND SAGAR REAL ESTATES PVT. LTD., INDORE 10 THE LAND IN QUESTION. FURTHER, THE A.O. WOULD ALSO C ONSIDER CONTENTION OF THE ASSESSEE THAT THERE WAS A TYPOGRAPHIC AL ERROR IN THE ACCOUNTS OF THE ASSESSEE. GROUNDS RAISED IN THIS APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES AS INDICAT ED ABOVE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 02 . 01.2019. SD/- (MANISH BORAD) SD/- (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER INDORE; DATED : 02/01/2019 VG /SPS COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER ASSISTANT REGISTRAR, INDORE