I.T.O. Ward -1(1), RAIPUR V. M/S NANCY REAL ESTATE PVT. LTD., RAIPUR (CG)

ITA 372/BIL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0207 (ITAT-RAIPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 24-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Opportunity of being heard; Corroborative evidences; Capital receipt; Capital Gains
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

1 ITA NO. 372/ RPR /2014. IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO.372/RPR/2014 ASSESSMENT YEAR : 2010 - 11. THE INCOME - TAX OFFICER, M/S NANCY REAL ESTATE PVT. LTD. WARD - 1(1), RAIPUR. VS. RAIPUR. PAN AABCN4165F. APPELLANT. RESPONDENT. APPELLANT BY : SHRI AJIT KUMAR LASKAR . RESPONDENT BY : SHRI S.R. RAO. . DATE OF HEARING : 1 9 - 10 - 2016 DATE OF PRONOUNCEMENT : 3 RD NOV.2016. O R D E R. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS), RAIPUR DATED 17 - 09 - 2014 AND PERTAINS TO ASSESSMENT YEAR 2010 - 11. THE GROUNDS OF APPEAL READ AS UNDER : 1. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED IN HOLDING THAT THE ASSESSEE WAS NOT INDULGING IN TRADING OF LAND MERELY BECAUSE LAND WAS CLASSIFIED UNDER INVESTMENT WHERE AS THE ASSESSEES INTEREST OF BUYING AND SELLING LAND CLEARLY ESTABLISHED THAT INCOME SHOULD BE ASSESSED UNDER THE HEAD BUSINESS OR PROFESSION? 2. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED IN DELETION OF RS.46,00,815/ - MADE BY THE AO AS PROFIT FROM SALE OF LAND WAS CHARGEABLE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION? 2 ITA NO. 372/ RPR /2014. 2. IN THIS CASE THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN PROFIT ON SALE OF AGRICULTURAL LAND AT RS.4 6,26,256/ - . THE AO EXAMINED THIS ISSUE AND OBSERVED AS UNDER : 4. AS SUBMITTED BY THE ASSESSEE, IT INTENDED TO CARRY ON THE BUSINESS OF THE PROPERTY DEALERS, DEVELOPERS AND PROMOTERS. AS A RESULT, THE ENTIRE ACCUMULATION OF LAND HAD BEEN SHOWN UNDER THE HEADS OF INVESTMENT AND THE PROFIT ON SALE OF LAND IS COMPUTED AS CAPITAL GAINS. AS THE LANDS SOLD WERE TREATED AS AGRICULTURAL LAND WHICH IS OUT OF THE PURVIEW OF CAPITAL ASSET AS PER SECTION 2(14)(III), THUS THE GAINS WERE TREATED AS CAPITAL RECEIPT W HICH IS NOT LIABLE TO INCOME TAX AND PAID MAT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD PURCHASED LAND WORTH RS.7,58.37.538/ - AND HAD SOLD SOME OF THE OLD' LANDS FOR RS.62,59,500 / - . ON FURTHER PROBE IT WAS REVEALED THAT IN PRECEDING YEARS AS WELL AS IN LATER YEARS TOO, THE ASSESSEE HAD MADE SIMILAR TYPES OF TRANSACTIONS. IN FACT, IN LATER YEARS THE AMOUNT OF SALE IS EVEN MORE THAN PURCHASE. - T'H U S , IT IS NOT DIFFICULT TO APPRAISE THAT THE MAIN OBJECTIVE OF THE ASSESSEE IS TRADING OF LANDS AND NOT THAT OF REAL ESTATE DEVELOPMENT. 5. THE ASSESSEE WAS ASKED TO PUT FORTH AN EXPLANATION AS TO WHY ITS ACTIVITY SHOULD NOT . BE TREATED AS TRADING AND NOT DEVELOPMENT - .. OF LAND. IN RE SPONSE TO THIS QUERY, THE ASSESSEE REPLIED THAT THE COMPANY HAS PURCHASED NUMBER OF LANDS, HOWEVER ONLY 5.03 HECTARES OF LAND IS SOLD DURING THE YEAR UNDER CONSIDERATION AS DECIDED BY THE BOARD OF THE ASSESSEE COMPANY. IT WAS FURTHER REPL IED THAT THE COMPANY HAD NOT .UNDERTAKEN ANY PROJECT ON THE LAND ALREADY PROCURED TILL DATE. THE ASSESSEE S REPLY IS NOT FOUND TO BE SATISFACTORY AND IT IS CONCLUDED THAT IT WAS ENGAGED IN TRADING OF LAND AND IT HAD BEEN EVADING TAX BY PAYING U / S 115J AT A LOWER RATE, WHITE A HIGHER RATE WOULD BE APPLICABLE ON TREATING THE INCOME UNDER THE HEADS PROFIT AND GAINS UNDER BUSINESS AND. PROFESSION. THEREFORE , THE ENTIRE INCOME OF RS.46,OO,815 J - IS TREATED AS INCOME FROM BUSINESS. AND PROFESSION LIABLE TO BE CHARGED AT NORMAL RATES OF TAXES. 3. BEFORE THE LEARNED CIT(APPEALS) THE ASSESSEE SUBMITTED AS UNDER : THE APPELLANT HAS SUBMITTED THAT THE APPELLANT COMPANY WAS INCORPORATED WITH THE OBJECT TO UNDERTAKE BUSINESS OF REAL ESTATE AND STARTED ACQUIRING AGRICULTURAL LAND IN SURROUNDING OF RAIPUR CITY, MAINLY WHICH ARE OUTSIDE OF 8KM FROM MUNICIPAL LIMITS. THE APPELLANT FELT THAT THE AGRICULTURAL LAND SO PURCHASED WAS NOT FOUND USEFUL FOR PROJECT TOWNSHIP AND STARTED DISPOSING THE SAME, THAT THE ENTIRE LAND HAS BEEN SHOWN UNDER THE HEAD INVESTMENT. THEREFORE, THE AO WAS NOT JUSTIFIED IN TREATING THE SAME AS BUSINESS ASSETS AND INCOME THERE FROM AS BUSINESS INCOME. THE APPELLANT BEING A COMPANY HAS RIGHTLY CLAI MED SUCH INCOME UNDER THE HEAD CAPITAL GAIN AS IT WAS CAPITAL ASSETS SHOWN UNDER THE HEAD OF INVESTMENT IN THE BALANCE SHEET CONSISTENTLY AND PAID THE TAX UNDER MAT, AS SUCH CAPITAL GAIN WAS EXEMPTED BEING THE AGRICULTURAL LAND. 4. THE LEARNED CIT(APPEAL S) HELD AS UNDER : 6. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT. THE ONLY ISSUE TO BE DECIDED IS WHETHER THE LAND SOLD BY THE APPELLANT WAS TO BE TREATED AS TRADING OF LAND AND THE GAIN ON SALE OF SUCH LAND WAS INCOME FROM BUSINESS LIABLE TO BE CHARGED AT NORMAL RATE OF TAX OR THE GAIN FROM SALE OF LAND IS TO BE REGARDED AS CAPITAL RECEIPT I.E. HELD AS INVESTMENT AND NOT STOCK IN TRADE. IT IS SEEN THAT THE LAN D IN QUESTION WAS SHOWN AS 'INVESTMENT' IN THE REGULAR BOOKS OF ACCOUNT CONSISTENTLY AND THE AUDITOR ALSO DID NOT OBJECT ON CLASSIFICATION OF THE LAND IN QUESTION AS 'INVESTMENT' AND NOT AS STOCK IN TRADE. UNDISPUTEDLY, PART OF THE LAND WAS SOLD IN THE PRE CEDING ASSESSMENT YEARS AND THE APPELLANT'S CLAIM WAS ACCEPTED IN ASSESSMENT MADE U/S 143 (3) OF THE ACT. COPIES OF ASSESSMENT ORDERS FOR THE PRECEDING TWO YEARS AND THE AUDITED FINANCIAL STATEMENTS WERE FILED. ADMITTEDLY, THERE 3 ITA NO. 372/ RPR /2014. IS NO CHANGE IN THE FACTS DURING THE YEAR UNDER CONSIDERATION. THE A O HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO SHOW THAT THE LAND SOLD WAS HELD FOR TRADING PURPOSES. THE INTENTION OF THE APPELLANT THAT THE LAND WAS NOT HELD AS STOCK - IN - TRADE IS EMERGING FROM THE FACT THAT IT WAS CLASSIFIED UNDER THE HEAD 'INVESTMENTS' CONSISTENTLY. THEREFORE, I AM OF THE CONSIDERED OPINION THAT THE A O WAS NOT JUSTIFIED IN ASSESSING THE INCOME FROM SALE OF LANDS AS INCOME FROM BUSINESS WITHOUT BRINGING ANY CORROBORATIVE EVIDENCES. HENCE, THE A O IS DIRECTED TO ACCEPT THE APPELLANT'S CLAIM OF CAPITAL RECEIPT AS THE A O HAS NOT REBUTTED THE OTHER FACTS AND INGREDIENTS SUCH AS THE NATURE OF LAND SOLD BY THE APPELLANT BEING AGRICULTURAL LAND AND ITS DISTANCE FROM MUNICIPAL LIMITS WHICH ARE TAKING THE LAND SOLD OUT OF THE PURVIEW OF DEFINITION OF THE TERM 'CAPITAL ASSET' U/S 2(14)(III). 5. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL B EFORE THE ITAT. 6. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED D.R. SUBMITTED THAT THE LEARNED CIT(APPEALS) HAS ALLOWED ASSESSEES APPEAL ONLY ON THE GROUND THAT IN THE BOOKS OF ACCOUNTS THE LAND HAS BEEN SHOWN AS INVESTMENT. HE SUBMITTED THAT IT IS SETTLED LAW THAT DESCRIPTION IN ACCOUNT CANNOT BE A DECISIVE FACTOR IN DETERMINING THE ACTUAL NATURE OF THE TRANSACTION. LEARNED D.R. SUBMITTED THAT THE ASSESSEE HAS BEEN HABITUALLY SELLING LANDS REGULARLY IN PRECEDING AND SUBS EQUENT ASSESSMENT YEARS. HENCE IT IS AMPLY CLEAR THAT THE ASSESSEE IS TRADING IN THE LAND. HENCE LEARNED D.R. SUBMITTED THAT THE DECISION OF THE AO BE RESTORED. 7. PER CONTRA LEARNED COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER OF THE LEARNED CIT(APPEALS). HE ALSO REFERRED TO THE MEMORANDUM OF ARTICLE OF ASSOCIATION OF THE COMPANY FOR THE PROPOSITION THAT PURCHASE FOR INVESTMENT, RESALE OR TO TRAFFIC IN LAND IS ALSO ONE OF THE MAIN OBJECT OF THE ASSESSEE COMPANY. HE ALSO REFERRED TO EARLIER YEARS ORDERS IN WH ICH SIMILAR RETURNS HAVE BEEN ACCEPTED BY THE AO. 8. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. FIRST OF ALL I FIND THAT IN THIS CASE THE ASSESSEE HAS SHOWN PROFIT ON SALE OF AGRICULTURAL LAND. THERE HAS BEEN NO EXAMINATION WHATS OEVER BY THE AUTHORITIES BELOW AS TO WHETHER THE LAND SOLD WAS AGRICULTURAL OR NOT, WHETHER IT SATISFIES THE CRITERIA OF 4 ITA NO. 372/ RPR /2014. SALE OF AGRICULTURAL LAND. THE ASSESSEES CLAIM THAT IN EARLIER YEARS IT WAS SO ALLOWED CANNOT BE A BASIS FOR CONTINUING WITH THE PRACT ICE OF NON EXAMINATION OF THE ISSUE. IT IS SETTLED LAW FROM THE HONBLE APEX COURT THAT PERPETUATING AN ERROR IS NO HEROISM. THE FACT THAT THE ASSESSEE IS REGULARLY SELLING LAND ALSO DOES NOT SUPPORT THE ASSESSEES CLAIM THAT IT IS NOT A TRADING ACTIVI TY. LEARNED CIT(APPEALS) HAS ALSO ERRED IN SOLELY RELYING UPON THE DESCRIPTION OF THE LAND AS INVESTMENT IN THE BALANCE SHEET. IT IS SETTLED LAW FROM THE HONBLE APEX COURT THAT DESCRIPTION IN THE BALANCE SHEET IS NOT THE CONCLUSIVE PROOF OF THE CHARACTER OF THE TRANSACTION. I N MY CONSIDERED OPINION THE ISSUE NEEDS TO BE REMITTED TO THE FILE OF THE AO. THE AO SHALL EXAMINE AFRESH THE ASSESSEES CLAIM BY TAKING INTO ACCOUNT THE ABOVE OBSERVATION AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. 9. IN THE RESULT THIS APPEAL BY THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 3 RD DAY OF NOV., 2016. SD/ - ( SHAMIM YAHYA) ACCOUNTANT MEMBER. DATED: 3 RD NOV., 2016. COPY FORWARDED TO : 1. M/S NANCY REAL ESTATE PVT. LTD. NEAR MATA LAXMI HOSPITAL, ANUPAM NAGAR, RAIPUR. 2. I.T.O., WARD - 1(1), RAIPUR. 3. C.I.T., RAIPUR. 4. CIT(APPEALS), RAIPUR. 5. D.R., ITAT, RAIPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.