The ITO, Ward-2(2)(5), Ahmedabad V. Smt. Sejal D. Shah, Ahmedabad

ITA 3400/AHD/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6322 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 18-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Cost of acquisition; Corroborative evidences
• Section: 50C; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE, SHRI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER ITA NO. 3400/AHD/2014 (ASSESSMENT YEAR: 2010-11) THE INCOME-TAX OFFICER, WARD 2(2)(5), 1 ST FLOOR, C. U. SHAH BLDG., ASHRAM ROAD, AHMEDABAD 380014 APPEL LANT VS. SMT. SEJAL D SHAH, 16, FRIENDS COLONY, NR. D. K. PATEL HALL, NARANPURA, AHMEDABAD 380 013 RESPONDENT PAN: AASPA3326P /BY REVENUE : SHRI V. K. SINGH, SR. D.R /BY ASSESSEE : SHRI S. N. SOPARKAR, A.R. /DATE OF HEARING : 19.12.2017 /DATE OF PRONOUNCEMENT : 10.01.2018 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2010-11 A RISES AGAINST THE CIT(A)-XIV, AHMEDABADS ORDER DATED 09.09.2014 IN C ASE NO. CIT(A)- XIV/ITO/WARD-7(4)/215/2013-14, REVERSING ASSESSING OFFICERS ACTION MAKING SHORT TERM CAPITAL GAINS ADDITION OF RS.36,06,950/- AFTER INVOKING SECTION 50C, IN PROCEEDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES REITERATING THEIR RESPECTIV E STANDS. CASE FILE PERUSED. ITA NO. 3400/AHD/14 [ITO VS. SMT. SEJAL D SHAH] A.Y. 2010-11 - 2 - 2. WE NOTICE AT THE OUTSET THAT THE CIT(A)S FINDIN GS UNDER CHALLENGE ELABORATELY DISCUSS THE RELEVANT FACTS, ASSESSING O FFICERS ACTION MAKING THE IMPUGNED ADDITION IN ASSESSMENT ORDER DATED 28.03.2 013 AS WELL AS VARIOUS EVIDENCES FILED DURING THE COURSE OF LOWER APPELLAT E PROCEEDINGS AS UNDER: 5. I HAVE PERUSED THE FACTS OF THE CASE AS ENUMERA TED BY A.O. AND AS SUBMITTED BY APPELLANT. I HAVE PERUSED THE CASE LAWS RELIED ON B Y A.O. AS WELL AS APPELLANT. AFTER CAREFUL CONSIDERATION OF FACTS, SUBMISSION AND CONT ENTION OF BOTH A.O. AS WELL AS OF APPELLANT, GROUND WISE ADJUDICATION IS AS FOLLOWS: 5.1. BEFORE ADJUDICATION OF GROUNDS FOLLOWI NG FACTS REQUIRES CONSIDERATION: (1) THERE IS A NOTARIZED M.O.U. DATED 06.03.2007 BETWEEN NAVRATNA TOWNSHIP PVT.LTD.AND APPELLANT TO ACT AS FACILITATOR IN VIEW OF- (I) M/S. NAVRATNA GROUP IS ENGAGED IN THE ACTIVITIE S OF PURCHASING AND SELLING LANDS, BUILDING AND CONSTRUCTION OF SUCH BUILDING. (II) A PLOTTING SCHEME COMPRISING INTER-ALIA VARIOU S RESIDENTIAL AND NON-RESIDENTIAL BUILDING, GOLF COURSE AND A CLUB IS PR OPOSED BY M/S.NAVRATNA GROUP AT LAND SITUATED AT SANAND, AND AT VSANA LYAVA FOR WHICH L AND HAD ALREADY IDENTIFIED BY M/S.NAVRATNA GROUP. NEGOTIATIONS ARE ALREADY MADE FROM LAND OWNER BUT IN VIEW OF THE LAN D IN QUESTION BEING AGRICULTURAL LAND IT WILL TAKE TIME TO GET IT CONVERTED INTO NON-AGRI CULTURAL LAND AND M/S.NAVRATNA GROUP IS NOT ENTITLED TO PURCHASE AGRICULTURAL LAND. (III) THE APPELLANT BEING AGRICULTURIST AND CAN PU RCHASE SUCH AGRICULTURAL LAND AND M/S.NAVRATNA GROUP DOES NOT WANT TO LOSE OPPORTUNIT Y OR OTHERWISE ANY IMPEDIMENT IN THE SCHEME AS WELL AS RATE FOR PURCHASE (COST OF AC QUISITION) CONTACTED APPELLANT. THE APPELLANT HAS TO ONLY LEND HER NAME WHIIE ALL OTHER FORMALITIES ABOUT IDENTIFICATION, TITLE CLEARANCE, REGISTRATION ETC. ARE TO BE CARRIED OUT BY M/S.NAVRATNA GROUP'S INSTRUCTION AND ALL RELATED EXPENSES ARE REQUIRED TO BE BORNE B Y M/S.NAVRATNA GROUP. THE APPELLANT WAS TO RECEIVE RS.15,000 FOR SUCH NAME FACILITATION . IT WAS ALSO AGREED THAT AFTER GETTING SUCH LAND CONVERTED TO NON-AGRICULTURAL, LAND HAS T O BE TRANSFERRED OR CONVEYED TO M/S.NAVRATNA GROUP PARTY. (2) AS PER DEED OF CONVEYANCE DATED 30.06.2008, AGR ICULTURAL LAND (OLD TENURE), NON- IRRIGATED (BIN PIYAT) ADMEASURING 4 HECTOR, 80 ACRE AND 68 SQ.MT. OF SURVEY NO.231/1 + 2 OF MOJE SANAND VILLAGE, TAL.SANAND WAS PURCHASED BY APPELLANT ALONG WITH OTHER CO- OWNERS FOR A CONSIDERATION OF RS.2,28,12,111. THE L AND WAS PURCHASED FROM HASMUKH SINGH BHAVSINGH VAGHELA. THREE CO-OWNERS WITH RESPE CTIVE SHARE ARE AS FOLLOWS: (I) SHRI DEVANG DINESHBAHI SHAH (10%) I.E. LAND ADMEASURING 49 AARE 07 SQ.MT.OF UNDIVIDED SHARE OF LAND (PAN : ADFPS 9924H) (II) SMT.SEJALBEN BIPINBHAI AMIN(10%) I.E. LAND ADMEASURING 49 AARE 07 SQ.MTOF UNDIVIDED SHARE OF LAND: (PAN: AASPA 3326P) (III) SMT.KALABEN BIPINBHAIJJAMIN (80%) I.EF. LAND ADMEASURING 3 HECTOR 92 AARE 54 SQ.MT.UNDIVIDED SHARE OF LAND. THE APPELLANT PAID RS.22,81,211 (AS MENTIONED IN CO NVEYANCE DEED) VIDE CH.NO.521852, DATED 14.08.2008 DRAWN ON UNION BANK OF INDIA, C.G.ROAD, AHMEDABAD STAMP DUTY OF RS.11,17,200 (577100 + 540100) WAS PA ID. (3) THE APPELLANT SUBMITTED A CONTRA ACCOUNT AND CO NFIRMATION FROM M/S.NAVRATNA TOWNSHIP PVT.LTD. (PAN AACCN 3909 L) WHICH REFLECT THAT RS.22,81,211 VIDE CH.NO.348396 OF HDFC BANK PAID ON 21.08.2008 TO APP ELLANT FOR PURCHASE OF THIS LAND. THE APPELLANT SUBMITTED LEDGER ACCOUNT, CONTRA ACCO UNT TO REFLECT THAT EXPENDITURE ITA NO. 3400/AHD/14 [ITO VS. SMT. SEJAL D SHAH] A.Y. 2010-11 - 3 - RELATED TO STAMP DUTY, FOR CONVERSION OF AGRICULTUR AL LAND TO NON-AGRICULTURAL LAND ALSO INCURRED BY M/S. NAVRATNA GROUP. (4) AS PER SALE DEED DATED 01.10.2009 OF THIS LAND BETWEEN ALL THE THREE CO-OWNERS I.E. SHRI DEVANG DINESHBHAI SHAH, SMT.SEJALBEN BIPI NBRA AMIN AND SMT.KALABEN BIPINBHAI AMIN THROUGH THEIR POWER OF ATTORNEY SRR PIYUSH BHANUPRASAD TRIVEDI(SHRI PIYUSH BHANUPRASAD TRIVEDI WAS WITNESS FOR THE MOU) AND SAGAR SANAND INFRABUILD PVT. LIMITED(PAN AALCS3683F) FOR A CONSIDERATION OF RS.2,47,23,000, THE PURCHASER PAID STAMP DUTY :' RS.28,85,300 (1211500 + 1673800 ). THE APPELLANT RECEIVED RS.24,72,3CC VIDE CH.NO.244916 DATED 01.10.2009 DRA WN ON HDFC BANK, NAVRANGPURA. (5) THE APPELLANT SUBMITTED LEDGER ACCOUNT OF LAND HELD FOR NAVRATNA GROUP WHERE APART FROM APPELLANT SHARE FOR COST OF PURCHASE OF RS.22,81,211 AND SHARE OF SALE CONSIDERATION OF RS.24,72,300, APPELLANT DEBITED SH ARE OF STAMP CHARGES FOR PURCHASE OF RS. 1,11,802, REGD. EXPENSES OF RS.22,857 AND N.A.C HARGE,S M BS.50,295 RESULTING INTO PROFIT ON SALE OF LAND AT RS.6135. (6) A COPY OF STATEMENT RECORDED BY A.O. OF SMT.SEJ ALBEN BIPINBHAI AMIN U/S. 131 OF THE ACT DATED 01.11.2012. REFLECT THAT APPELLANT AD MITTED IN REPLY TO Q.NO.5 THAT HER NAME AS FACILITATOR WAS USED IN DEALING OF LAND BY SAGAR SANAND INFRABUILD PVT. LIMITED WHICH IS A COMPANY IN WHICH HER HUSBAND SHRI DEVANG D SHAH IS ONE OF THE DIRECTORS. SHE STATED CATEGORICALLY THAT AL! THE TRANSACTIONS OF MONEY ARE RELATED TO COMPANY. (7) THE APPELLANT SUBMITTED A COPY OF ORDER DATED 0 8.02.2013 U/S.143(3) OF THE ACT FOR A.Y.2010-11 IN THE CASE OF SHRI DEVANG DINESHBH AI SHAH (PAN ADFPS 9924 H) BY THE ITO.WD.11(1), AHMEDABAD WHERE A.O. SHOW CAUSED (DTD. 16.01.2013) AS FOLLOWS: '4 FROM THE DETAILS SUBMITTED BY YOU ON 16-01-2013 IT APPEARS THAT THE PURCHASE OF LANDS ARE MADE BY YOU FROM THE FUNDS PROVIDED BY A COMPANY CALLED NAVRATNA TOWNSHIP PRIVATE LIMITED AND IT ALSO APPEARS THAT THESE LAND S ARE SOLD TO A COMPANY NAMED SAGAR SANAND INFRABUILD PRIVATE LIMITED, PLEASE PROVIDE W HAT IS THE ARRANGEMENT/AGREEMENT/UNDERSTANDING WITH THESE COMPANIES. FURTHER, CONSIDERING THE SIGN IFICANT NUMBER OF TRANSACTION OF PURCHASE AND SALE OF LAND WITH SUCH BORROWED FUNDS SHOW ME CAUSE AS TO WHY THE PROFIT MADE ON THE SALE OF LAND OF RS. 30,771 SHOWN AS CAP ITAL GAIN IN YOUR RETURN OF INCOME OF A. Y. 2010-11 SHOULD NOT BE TREATED AS PROFITS AND GAINS MADE FROM BUSINESS AND PROFESSION.' SHRI DEVANG DINESHBHAI SHAH VIDE LETTER DATED 24.01 .2013 REPLIED AS FOLLOWS: '3. VIDE POINT NO. 4 YOUR GOODSELVES HAS SHOW CAUSE D AS TO WHY THE PROFIT EARNED ON SALE OF LAND OF RS. 30,771 SHOULD NOT BE TREATED AS PROFIT AND GAINS MADE FROM BUSINESS AND PROFESSION AS AGAINST PROFIT SHOWN AS CAPITAL G AIN IN THE RETURN OF INCOME FOR A. Y. 201 0-11, CONSIDERING THAT THE PURCHASE OF LAND WAS MADE FROM THE FUNDS PROVIDED BY NAVRATNA TOWNSHIP PVT LIMITED. IN THIS CONNECTION T HE ASSESSEE SUBMITS AS UNDER: (I) THE FACTS OF THIS TRANSACTION ARE THAT THE ASSE SSEE IS A FAIMER AND IS ELIGIBLE TO PURCHASE AN AGRICULTURAL LAND IN HIS NAME. NAVRATNA TOWNSHIP PVT LIMITED IN 2006 -07 HAD APPROACHED ME TO PURCHASE AN AGRICULTURAL LAND ON THEIR BEHALF FOR THE REASON THAT THE COMPANY WAS UNABLE AND LEGALLY NOT ELIGIBLE TO PURCHASE THE AGRICULTURAL LAND FROM THE FARMERS IN ITS NAME TILL THE SAME WAS CONVERTED INTO NON-AGRICULTURAL LAND. ITA NO. 3400/AHD/14 [ITO VS. SMT. SEJAL D SHAH] A.Y. 2010-11 - 4 - (II) FOR HELPING THE COMPANY TO PURCHASE THE LAND T HE ASSESSEE HAD ACTED AS A FACILITATOR FOR PURCHASING THE AGRICULTURAL LAND FROM THE..,OWN ERS OF THE AGRICULTURAL LAND I.E. THE FARMERS ON BEHALF OF NAVRATNA TOWNSHIP PVT. LIMITED . (III) AS THE ASSESSEE WAS ONLY A FACILITATOR, THE E NTIRE LEGAL WORK FOR VERIFICATION OF THE TITLE TILL THE COMPLETION OF THE TRANSACTION UPTO R EGISTRATION OF CONVEYANCE DEED WAS TO BE CARRIED OUT BY THE NAVRATNA GROUP. (IV) FURTHER, ALL THE FUNDS REQUIRED FOR PURCHASE O F LAND ON BEHALF OF THE COMPANY INCLUDING ALL CHARGES, EXPENSES AND OUTFLOWS WERE T O BE BORNE BY THE NAVRATNA GROUP. IT WAS ALSO UNDERSTOOD THAT ALL RISK, REWARDS AND OBLI GATIONS INCLUDING COMPLIANCE OF LEGAL PROVISIONS WERE TO BE DONE BY THE NAVRATNA GROUP. (V) THE ASSESSEE WAS ALSO UNDER OBLIGATION TO SELL THE SAID LAND AFTER ITS CONVERSION TO NON-AGRICULTURAL STATUS TO THE NAVRATNA TOWNSHIP PV T LIMITED OR ANY OF ITS GROUP COMPANIES. (VI) ALL THE ABOVE WERE MUTUALLY UNDERSTOOD BY WAY OF A MEMORANDUM OF UNDERSTANDING ENTERED BY THE ASSESSEE WITH NAVRATNA TOWNSHIP PVT LIMITED IN- 2006-07, THE COPY OF WHICH IS ENCLOSED VIDE ANNEXURE 3 FOR YOUR READY R EFERENCE. 3.1 IN VIEW OF THE ABOVE AND TAKING INTO CONSIDERAT ION THE MEMORANDUM OF UNDERSTANDING ENTERED THE ASSESSEE WAS BEING PROVID ED THE NECESSARY FUNDS FOR PURCHASE OF LAND ON BEHALF OF NAVRATNA TOWNSHIP PVT . LIMITED. THE COPY OF THE LEDGER ACCOUNT IS ALSO SUBMITTED TO YOUR GOOD SERVES VIDE COMMUNICATION DATED 16TH JANUARY, 2013 AND FOR THE SAKE OF CONVENIENCE THE SAME IS NO T REPEATED. THESE FUNDS WERE UTILIZED IN MAKING PAYMENT TO THE FARMERS FOR PURCHASE OF AG RICULTURAL LAND. 3.2 ONCE THE LAND WAS PURCHASED FROM THE FARMERS NE CESSARY LEGAL FORMALITIES FOR CONVERTING THE LAND INTO NON-AGRICULTURAL LAND WAS CARRIED OUT BY THE PERSONNEL OF THE NAVIATNA GROUP AND AFTER SHORT PERIOD ALL THOSE LAN DS WERE SOLD TO SAGAR SANAND INFRABUILD PVT. LIMITED AT THE INSTANCE OF NAVRATNA TOWNSHIP PVT LIMITED. THE DATE ON WHICH THE NA PERMISSION WAS OBTAINED AND CONVEYANCE DEED EXECUTED IS AS UNDER: SURVEY NO DATE ON WHICH THE APPROVAL OF CONVERSION INTO NA LAND RECEIVED DATE OF CONVEYANCE DEED 230/2 6/2/2008 27/07/2009 273/1 21/05/2009 1/10/2009 249/2 29/06/2009 1/10/2009 249/3/1+4 29/06/2009 1/10/2009 191/1+2+3P3 30/06/2009 1/10/2009 196/1 30/06/2009 1/10/2009 231/1+2 30/06/2009 1/10/2009 ACCORDINGLY, A/MOST ALL THE LANDS WERE BEING TRANSF ERRED WITHIN FOR A PERIOD AS SMALL AS THREE MONTHS. 3.3 FOR THE PURPOSE OF FACILITATING THE PURCHASE OF LAND ON BEHALF OF NAVRATNA GROUP, THE ASS'ESSEE WAS TO BE PAID AN AMOUNT OF RS . 15,000 PER CONVEYANCE DEED OR SUCH AMOUNT AS MAY BE MUTUALLY DECIDED. ACCORDINGLY , THE ASSESSEE HAS SHOWN THE PROFIT OF RS. 31,077 IN THE RETURN OF INCOME. ITA NO. 3400/AHD/14 [ITO VS. SMT. SEJAL D SHAH] A.Y. 2010-11 - 5 - 3.4 IN VIEW OF THE ABOVE STATED FACTS IT IS SUBMITT ED THAT THE ASSESSEE HAS ONLY FACILITATED IN PURCHASING AND SELLING OF THE LAND O N BEHALF OF NAVRATNA GROUP. THIS IS FOR THE REASON THAT THE COMPANY CANNOT LEGALLY PURCHASE THE LAND AND THE ASSESSEE BEING AN INDIVIDUAL WAS ELIGIBLE TO PURCHASE THE SAID LAND F ROM THE FARMERS. THE SAME IS ALSO EVIDENT FROM THE TREATMENT AND THE DISCLOSURE SHOWN JN THE BALANCE SHEET WHICH IS REPRODUCED HEREUNDER. A COPY OF THE BALANCE SHEET H AS A/READY BEEN FURNISHED TO YOUR HONOUR VIDE AN EARLIER COMMUNICATION. ASSETS AMOUNT(RS.) CURRENTASSETS: WIP (ASSET HELD FOR NAVIATNA GROUP) 2,89,77,291 FURTHER, THE FUNDS PROVIDED BY NAVRATNA GROUP IS AL SO REFLECTED ON THE LIABILITY SIDE OF THE BALANCE SHEET. 3.5 SUMMARIZING, THE ASSESSEE IS ONLY A FACILITATOR IN THE ENTIRE TRANSACTION FOR PURCHASE OF LAND BY THE NAVRATNA GROUP FROM THE OWN EFS OF THE AGRICULTURAL LAND I.E. THE FARMERS. 3.6 IN VIEW OF FACTS AND CIRCUMSTANCES MENTIONED AB OVE, THERE IS EVERY POSSIBILITY THAT ONE MAY VALIDLY TAKE A VIEW THAT THE INCOME IS NOT A CAPITAL GAIN BUT IT IS BUSINESS INCOME. HOWEVER, THE ASSESSEE REQUESTS YOUR GOODSEL VES THAT; ALL FACTS HAVING BEEN TRULY AND CORRECTLY STATED, NO PENALTY PROCEEDINGS BE INITIATED, IF IT IS TREATED DIFFERENTLY.' FROM THE MEMORANDUM OF UNDERSTANDING ENTERED BY THE ASSESSEE WITH NAVRATNA TOWNSHIP PVT. LIMITED, FILED BY THE ASSESSEE, IT WA S SEEN THAT VIDE PARA NO. 2(J) THE ASSESSEE WAS TO RECEIVE A COMPENSATION OF RS. 15,00 0 PER CONVEYANCE OR ANY OTHER AMOUNT AS WAS MUTUALLY DECIDED. DURING THE ASSESSME NT YEAR, A TOTAL OF SEVEN CONVEYANCE DEEDS WERE EXECUTED AND ACCORDINGLY, THE INCOME WHICH HAD ACCRUED TO THE ASSESSEE WAS RS. 1,05,000/-. AGAINST THE SAME, THE ASSESSEE HAS SHOWN INCOME OF RS. 30,771/- ONLY UNDER THE HEAD 'CAPITAL GAIN'. THE IN COME OF RS. 30,771/- HAS BEEN COMPUTED AFTER CONSIDERING ALL THE COST AND EXPENSE S TOWARDS THE PURCHASE OF LAND ON BEHALF OF NAVRATNA TOWNSHIP PVT. LIMITED.' THE A.O. HELD AS FOLLOWS: 'I HAVE DULY CONSIDERED THE SUBMISSION OF THE ASSES SEE. ON VERIFICATION OF THE MOU FILED BY THE ASSESSEE, IT IS PROVED THAT THE ASSESSEE HAS ACTED AS A FACILITATOR IN THE ENTIRE TRANSACTION FOR AND ON BEHALF OF NAVRATNA GROUP. AL L THE LANDS HAVE BEEN PURCHASED WITH THE FUNDS PROVIDED BY NAVRATNA GROUP TO THE ASSESSE E WHICH IN TURN HAVE BEEN USED FOR MAKING PAYMENT TO THE FARMERS. ALL THE LEGAL WORK A ND THE VERIFICATION PROCESS HAVE BEEN CARRIED OUT BY NAVRATNA GROUP. SUBSEQUENT TO THE CO NVERSION TO NON-AGRICULTURAL, THESE LANDS WITHIN A VERY SHORT PERIOD HAVE BEEN SOLD TO SAGAR SANAND INFRABUILD PVT, LIMITED, IT IS ALSO IMPORTANT TO NOTE THAT THE ASSESSEE IN T HE BALANCE SHEET SO FILED IN THE PROCEEDINGS HAS ALSO CLASSIFIED THESE LANDS AS ASSE T HELD FOR NAVRATNA GROUP. ALL THESE FACTORS CUMULATIVELY LEADS TO THE CONCLUSION, THAT THE SAID LANDS ARE NOT A CAPITAL ASSET IN THE HANDS OF THE ASSESSEE AND ACCORDINGLY THE INCOM E SHOWN BY THE ASSESSEE AS CAPITAL GAINS IS NOT ACCEPTABLE. THE ASSESSEE IS A TRADER A ND THE ENTIRE TRANSACTION ENTERED BY THE ASSESSEE IS TREATED AS BUSINESS INCOME. THE SAME IS ALSO ACCEPTED BY THE ASSESSEE HIMSELF IN THE WRITTEN SUBMISSION FILED BY HIM, REPRODUCED ABOVE. HENCE, AS MENTIONED IN PARA NO. 4, THE ASSESSEE OUG HT TO HAVE SHOWN BUSINESS INCOME OF RS. 1,05,000/- AS AGAINST THE INCOME OF RS. 30,771/ - AND ACCORDINGLY, DIFFERENCE OF RS. 74,229 (1,05,000 30,771) IS TREATED AS BUSINESS I NCOME AND THEREFORE, THE SAME IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. SIN CE THE ASSESSEE HAS FURNISHED ITA NO. 3400/AHD/14 [ITO VS. SMT. SEJAL D SHAH] A.Y. 2010-11 - 6 - INACCURATE PARTICULARS OF INCOME AND THEREBY CONCEA LED HIS INCOME AND THE ASSESSEE HIMSELF OFFERED THE SAME ONLY AFTER THE SAME IS POI NTED OUT TO HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS, PENALTY PROCEEDINGS U/S.271 (L)(C) OF THE I.T. ACT IS BEING INITIATED SEPARATELY.' (8) THE APPELLANT SUBMITTED A COPY OF ORDER DATED 1 3.01.2014 U/S.143(3) R.W.S. 147 OF THE ACT FOR A.Y.2010-11 IN THE CASE O F KALABEN NAROTTAMDAS PATEL (ADTPP 7689N) BY THE ITO.WD.7(4), AHMEDABAD. THE AO SHOW CAUSED THE ASSESSEE AS FOLLOWS: 'PLEASE FURNISH THE COPY OF PURCHASE DEED OF AGRICU LTURE LAND AT SURVEY NO. 231/1 & 231/2 ALONG WITH DETAILS OF INVESTMENTS ALONG WITH NECESSARY SUPPORTING EVIDENCE. YOU HAVE SOFT! ABOVE LAND FAR RS. 2,47,23,000/ YOUR SH ARE IS 80%. AS PER JANTRI VALUE, THE SALE CONSIDERATION IS WORKED OUT TO RS. 5,88,81,600 /-. AS PER SECTION 50C OF I.T. ACT, FOR CALCULATION OF CAPITAL GAIN THE SALE CONSIDERATION IS TAKEN AS PER JANTRI VALUE. YOU ARE THEREOF REQUESTED TO SHOW CAUSE AS WHY CAPITAL GAIN SHOULD NOT BE WORKED OUT ON SALE CONS/DERATION OF RS. 5,88,81,600/. PLEASE FURNISH THE DETAILS OF MOVABLE AND IMMOVABLE PROPERTY HELD BY YOU.' AFTER CONSIDERING VARIOUS DETAILS AND EXPLANATION T HE A.O. HELD THAT- 'I HAVE DULY CONSIDERED THE SUBMISSION OF THE ASSES SEE. ON VERIFICATION OF THE MOU FILED BY THE ASSESSEE IT IS SEEN THAT THE ASSESSEE'S BUSI NESS IS OF PURCHASE OF AGRICULTURAL LAND FOR THE ENTITIES ~ HO CANNOT PURCHASE THE SAME BECA USE OF LEGAL CONSTRAINTS THE ASSESSEE HAD PURCHASED THE AGRICULTURE LAND FROM THE OWNERS OF THE AGRICULTURAL LAND I.E. THE FARMERS ON BEHALF OF NAVRATNA GROUP DURING THE COUR SE OF BUSINESS OF REAL ESTATE DEVELOPMENT OF THAT GROUP FOR THE REASON THAT THE C OMPANY WAS UNABLE AND LEGALLY NOT ELIGIBLE TO PURCHASE THE AGRICULTURAL LAND FROM THE FARMERS IN ITS NAME TILL THE SAME WAS CONVERTED INTO NONAGRICULTURAL LAND. ON DETAILED R EADING OF THE MEMORANDUM OF UNDERSTANDING TOGETHER WITH THE SUBMISSION FILED BY THE ASSESSEE, IT IS SEEN THAT THE ASSESSEE HAS PURCHASED THE LAND WITH BORROWED FUNDS OF NAVRATNA TOWNSHIP PVT LTD. ON BEHALF OF THEM WHICH IN TURN HAVE BEEN USED FOR MAK ING PAYMENT TO THE FARMERS. ALL THE LEGAL WORK AND THE VERIFICATION PROCESS HAVE BEEN C ARRIED OUT BY NAVRATNA GROUP. THE ASSESSEE WAS ALSO UNDER OBLIGATION TO SELL THE SAID LAND AFTER ITS CONVERSION TO NON- AGRICULTURAL STATUS TO THE NAVRATNA GROUP OF COMPAN IES. SUBSEQUENT TO THE CONVERSION TO NON-AGRICULTURAL, THESE LANDS WITHIN A VERY SHORT P ERIOD HAVE BEEN SOLD TO SAGAR SANAND INFRAFAUILD PVT. LED: A GROUP CONCERN OF NAVRATNA T OWNSHIP PRIVATE LIMITED. UPON SELLING THE LAND THE ASSESSEE HAS GIVEN HACK THE MO NEY TO NAVRATNA TOWNSHIP PVT. LTD. IT IS ALSO IMPORTANT TO NOTE THAT THE ASSESSEE HAS GOT THE BOOKS' OF ACCOUNT AUDITED U/S.44AB OF THE I.T. ACT 196 I AND HAS ALSO FILED THE FAX AU DIT REPORT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN THE AUDITED BALANCE SHEE T SO FILED IN THE PROCEEDINGS THE ASSESSEE HAS ALSO CLASSIFIED THESE LANDS AS ASSET H ELD FOR NAVRATNA GROUP. THE FUNDS PROVIDED BY NAVRATNA GROUP ARE ALSO REFLECTED ON TH E LIABILITY SIDE OF THE BALANCE SHEET CONSIDERING THE NATURE OF BUSINESS, THE NUMBER OF T RANSACTIONS ENTERED INTO DURING PRESENT & SUBSEQUENT ASSESSMENT YEAR IS ALSO HIGH. ACCORDINGLY THE FACTORS SUCH AS THE NATURE OF BUSINESS, THE NUMBER OF TRANSACTIONS ENTE RED INTO AND THE FACT THAT THE LANDS HAVE BEEN PURCHASED WITH BORROWED FUNDS LEADS TO TH E CONCLUSION THAT THE SAID LANDS ARE NOT A CAPITAL ASSET IN THE HANDS OF THE ASSESSEE, T HE ASSESSEE IS A TRADER AND THE ENTIRE TRANSACTION ENTERED BY THE ASSESSEE IS TREATED AS B USINESS INCOME, 9. FURTHER, IT IS STATED THAT AS PER MOU ENTERED WI TH NAVRATNA TOWNSHIP PVT. LTD., THE ASSESSEE IS BEING COMPENSATED AT THE RATE OF R. S. 15,000/- PER TRANSACTION FOR PURCHASING LAND ON THEIR BEHALF AS PART OF BUSINESS CARRIED OUT BY THE ASSESSEE, THE ASSESSEE HAS CARRIED OUT TWO SUCH TRANSACTIONS DURI NG THE YEAR UNDER CONSIDERATION AND ITA NO. 3400/AHD/14 [ITO VS. SMT. SEJAL D SHAH] A.Y. 2010-11 - 7 - ACCORDINGLY HAS SHOWN COMPENSATION INCOME OF RS, 30 ,000/- UNDER THE HEAD BUSINESS INCOME. THE COMPENSATION INCOME SHOWN FAY THE ASSES SEE IS NOT COMMENSURATE TO THE BUSINESS ACTIVITY CARRIED OUT BY HER, THE COMPENSAT ION INCOME OF RS, 15,000/- PER TRANSACTION IS BEING ENHANCED TO 1% OF SALE CONSIDE RATION AS PER CONVEYANCE DEEDS EXECUTED DURING THE YEAR UNDER CONSIDERATION ON HE HALF OF NAVRATNA GROUP. MOREOVER, ON PERUSAL OF THE BANK STATEMENT IT IS FOUND THAT T HE ASSESSEE HAS WITHDRAWN SUBSTANTIAL AMOUNTS ON VARIOUS DATES AGAINST WHICH PAYMENTS HAV E NOT BEEN MADE FOR PURCHASES / EXPENSES RELATABLE TO ACQUISITION OF LAND. FINALLY, THESE CASH WITHDRAWALS HAVE BEEN ACCUMULATED TO RS.5,89,50 I/- AS ON 31/03/2010. EVE N THOUGH, THIS AMOUNT HAS BEEN SHOWN IN THE BALANCE SHEET YET IT CANNOT BE DENIED THAT THE ASSESSEE IS IN POSSESSION OF THE CASH AT HER HAND AND SOME OF THIS AMOUNT MAY BE UTILISED BY HER FOR OTHER PERSONAL PURPOSES ALSO. MEANING THEREBY IS THAT THE ASSESSEE MAY HE RECEIVING THE AMOUNT OVER AND ABOVE THE AGREED AMOUNT HAS STATED IN THE MEMOR ANDUM OF UNDERSTANDING, HENCE, THE ASSESSEE OUGHT TO HAVE SHOWN BUSINESS INCOME OF RS.2,01,679/- [1% (1,97,78,400 + 3,89,500)] AS AGAINST THE INCOME OF RS, 30,000/- AN D ACCORDINGLY, DIFFERENCE OF RS. 1,71,679,- (2,01,679 - 30,000) IS ADDED TO THE BUSI NESS INCOME OF THE ASSESSEE, SINCE THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME AND THEREBY CONCEALED HIS INCOME PENALTY PROCEEDINGS U/S.27 1(1 )(C) OF THE I .T. ACT IS BEING INITIATED.' 5.2. NOW COMING TO ADJUDICATION OF VARIOUS GROUNDS OF APPEAL AS FOLLOWS: (A) GROUND NO.1 TO 3 ARE INTERLINKED AND AGAINST TH E COMPUTATION OF SHORT TERM CAPITAL GAIN OF RS.3606950 BY INVOKING PROVISIONS O F SECTION 50C OF THE ACT FOR TRANSACTION OF LAND PURCHASE AND SALE. THE A.O. REJECTED APPELLANT'S EXPLANATION OF BEING A FACILITATOR OF LAND PURCHASE AND SALE ON BEHALF OF M/S.NAVRATNA GROUP BECAUSE BO TH IN PURCHASE AS WELL AS SALE DEED RELATED TO LAND, THERE IS NO MENTION ABOUT M/S.NAVR ATNA GROUP INTEREST. THE A.O. HAS NOT CONSIDERED THE MOU ENTERED INTO BETWEEN APPELLANT A ND M/S.NAVRATNA GROUP AS AUTHENTIC AND CREDIBLE. FURTHER, A.O. INVOKED THE P ROVISIONS OF SECTION 5'OC OF THE ACT IN VIEW OF STAMP DUTY VALUATION TAKEN IN SALE DEED. THE APPELLANT IN THE RETURN OF INCOME DISCLOSED INC OME AS FOLLOWS: SALE CONSIDERATION OF SANAND LAND 24,72,300 LESS: COST OF ACQUISITION AND OTHER EXPENSES 24,6 6,165 NET INCOME DECLARED 6,135 IN VIEW OF THE FACTS RELATED TO PURCHASE AND SALE T RANSACTIONS OF THIS LAND BEING CO-OWNED BY THREE MEMBERS OF SHRI DEVANG DINESHBHAI SHAH I.E. HIS WIFE (APPELLANT) AND HIS MOTHER AND IN THEIR RESPECTIVE CASES, THE A .O. ACCEPTED THE CREDIBILITY OF MOU AS WELL AS EXPLANATION ABOUT GENUINITY OF TRANSACTIONS AS FACILITATOR. THE A.O. IN THE CASE OF APPELLANT IS NOT JUSTIFIED IN TREATING THE TRANSACT ION COMING UNDER CAPITAL GAIN. WHEN IT IS NOT DOUBTED AS EVIDENT FROM OTHER EVIDENCES LIKE MO U, ASSTT.ORDER IN THE CASE OF OTHER CO-OWNERS PARTICULARLY IN THE CASE OF KALABEN BY TH E SAME AO AFTER REOPENING, THEN SUCH EXPLANATION OF BEING FACILITATOR CANNOT BE REJECTED . THE DIFFERENCE OF STAMP VALUE ON SALE THOUGH INCURRED BY M/S.SAGAR SANAND INFRABUILD PVTL TD. BUT THE SAME IS ON ACCOUNT OF THE FACT THAT INITIALLY PURCHASED / ACQUIRED LAND W AS AN AGRICULTURAL LAND WHILE THE SAME WAS TRANSFERRED AS NON-AGRICULTURAL LAND BEFORE SAL E. IT IS THEREFORE EVEN IF A.O.'S CONTENTION IS ACCEPTED THAT THE LAND IS AN ASSET IN THE HANDS OF APPELLANT THEN, I AM INCLINED WITH APPELLANT THAT AS PER SETTLED LEGAL P ROPOSITION, ACQUIRING AGRICULTURAL LAND AND GETTING IT CONVERTED TO NON-AGRICULTURAL LAND B EFORE SALE IS AMOUNTING TO BUSINESS ACTIVITY. HON'BLE ITAT, AHMEDABAD IN THE CASE OF SH RI JAYANTIBHAI C. PATEL HUF VS. ITO.WD.9(2) IN ITA NO. 1001/AHD/2004 & ITA NO.1123 AND 11234/AHD/2006 , VIDE ORDER DATED 22.12.2011 HELD THAT WHEN AGRICULTURAL LAND IS CONVERTED INTO NON- AGRICULTURAL ACTIVITY AND SOLD THEN SUCH ACTIVITY I S AN ADVENTURE IN THE NATURE OF BUSINESS AND TRADE. ITA NO. 3400/AHD/14 [ITO VS. SMT. SEJAL D SHAH] A.Y. 2010-11 - 8 - IT IS ALSO NOT DISPUTED THAT SOURCE OF ACQUISITION, ALL INCIDENTAL EXPENSES ARE SOURCED BY M/S.NAVRATNA GROUP AND THE SAME CAN BE T REATED AS BORROWED FUND. THIS FURTHER MADE THESE TRANSACTIONS AS BUSINESS TRANSAC TIONS. BUT, ON THE OTHER SIDE, AS PER RATIO OF ASSTT.ORDER IN THE CASE OF OTHER CO-OWNER AS WELL AS FROM THE MOU ALSO, APPELLANT HAS NOT DISCLO SED THE AMOUNT OF RS. 15,000 AS FACILITATION CHARGES PER CONVEYANCE. IT IS THEREFOR E, WHEN CONVEYANCE DEED IS COMPLETED, SUCH AMOUNT ACCRUED TO APPELLANT IN PREVIOUS YEAR. THIS AMOUNT OF RS.15,000 IS THEREFORE REQUIRED TO BE TREATED AS BUSINESS INCOME OF APPELLANT AND TO BE ADDED AS ENHANCEMENT OF INCOME ON THIS ISSUE. IN REFERENCE TO INVOCATION OF SECTION 50C OF THE AC T IN THE CASE OF APPELLANT, THE AO IS NOT JUSTIFIED ON THE FACTS OF THE CASE. THE A .O. OF OTHER CO-OWNERS ALSO NOT TAKEN SUCH VIEW. IT IS THEREFORE ADDITION OF RS..36,06,94 8 BEING 10% SHARE OF APPELLANT OUT OF TOTAL CAPITAL GAIN OF RS.3,60,69,489 TAKING RECOURS E TO SECTION 50C IS DIRECTED TO BE DELETED. THE APPELLANT GETS RELIEF OF RS.36,06,948. IN CONCLUSION, ALL THESE GROUNDS ARE TREATED AS PARTLY ALLOWED WITH AN ENHANCEMENT OF RS . 15,000 FOR APPELLANT'S FACILITATING INCOME ACCRUED AND ARISED IN PREVIOUS YEAR. (B) GROUND NO.4 IS AGAINST THE INITIATION OF PENALT Y U/S.271(1)(C) OF THE ACT. THIS ISSUE IS NOW CONSEQUENTIAL IN VIEW OF RELIEF GRANTE D ABOVE. THIS GROUND IS THEREFORE TREATED AS ALLOWED. (C) GROUND NO.5 IS IN RESPECT OF CHARGING OF INTERE ST U/S.234 A, 234B, 234C AND 234D OF THE ACT. THE SAME IS ALSO CONSEQUENTIAL IN VIEW OF RELIEF GRANTED. BUT, CONSIDERING THE MANDATORY NATURE OF CHARGING SUCH I NTEREST, THE AO IS DIRECTED TO LEVY SUCH INTEREST AFTER GIVING EFFECT TO THE RELIEF AS WELL AS ENHANCEMENT OF INCOME. THIS GROUND IS TREATED AS PARTLY ALLOWED. 3. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY C ONTENDS THAT THE ASSESSING OFFICER HAD RIGHTLY INVOKED SECTION 50C O F THE ACT BEFORE MAKING THE IMPUGNED SHORT TERM CAPITAL GAINS ADDITION. HIS CA SE THEREFORE IS THAT THE IMPUGNED ADDITION IS LIABLE TO BE RESTORED. WE FIN D NO MERIT IN THE INSTANT ARGUMENT. IT HAS COME ON RECORD THAT THE ASSESSEE S SHARE IN THE LAND IN QUESTION IS ONLY TO THE EXTENT OF 1/10 TH . THE DEPARTMENT ITSELF HAS ASSESSED THE REMAINING TWO CO-SHARERS NAMELY SMT. KALABEN N. PATEL (8%) AND SH RI DEVANG DINESHBHAI SHAH(10%) TO HAVE DERIVED BUSINESS INCOME FROM PLOT TING THE RELEVANT CAPITAL ASSET IN QUESTION. THERE IS NO DISTINCTION ON FACT S POINTED OUT AT THE REVENUES BEHEST IN ASSESSEES CASE VIS--VIS ABOVE TWO REMAI NING CO-SHARERS. THIS TRIBUNAL IN CASE OF JAYANTIBHAI C. PATEL (SUPRA) ADMITTEDLY HOLDS THAT INCOME DERIVED FROM SALE AGRICULTURAL LAND AFTER ITS CONVERSION TO A NO N-AGRICULTURAL PARCEL AMOUNTS TO AN ADVENTURE IN THE NATURE OF BUSINESS AND TRADE RE SULTING IN BUSINESS INCOME. IT HAS FURTHER COME ON RECORD THAT THE INSTANT ASSESSE E HAD ENTERED INTO AN MOU(SUPRA) WITH THE DEVELOPER IN QUESTION. WE THER EFORE AFFIRM CIT(A)S FINDINGS UNDER CHALLENGE TREATING THE ASSESSEE TO H AVE DERIVED BUSINESS INCOME ITA NO. 3400/AHD/14 [ITO VS. SMT. SEJAL D SHAH] A.Y. 2010-11 - 9 - INSTEAD OF CAPITAL GAINS. LEARNED DEPARTMENTAL REP RESENTATIVE FAILS TO DISPUTE THAT THE SECTION 50C OF THE ACT DOES NOT APPLY IN THE IN STANT CASE. WE THEREFORE SEE NO REASON TO ACCEPT REVENUES GRIEVANCE PLEADED IN THE INSTANT APPEAL. 4. THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 10 TH DAY OF JANUARY, 2018.] SD/- SD/- ( PRAMOD KUMAR ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD: DATED 10/01/2018 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0