KAUTILYA SHARES AND STOCKS PRIVATE LIMITED, DELHI V. ITO, WARD 14(2), DELHI

ITA 3884/DEL/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1526 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: E
• Next Hearing Date: 26-05-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 26-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANSHUL
• Assessee Lawyers: AMIT GOEL
• Keywords: Capital asset; Rectification of order; Opportunity of being heard; Principle of natural justice; Assessment record; Capital Gains
• Section: 10; 154; 11; 143(3); 2(14); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’: NEW DELHI BEFORE, SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER ITA No.3884/Del/2023 (ASSESSMENT YEAR 2015-16) Kautilya Shares and Stocks Private Limited M-16, Ground Floor Main M Block Market Greater Kailash Part-1 New Delhi-110048 PAN:AAACK5431A Vs. Income Tax Officer Ward-14(2) Delhi (Appellant) (Respondent) Assessee by Shri Amit Goel, CA Sh. Pranav Yadav, Adv. Respondent by Shri Anshul, Sr. DR Date of Hearing 27/05/2024 Date of Pronouncement 21/06/2024 ORDER PER S.RIFAUR RAHMAN, AM: 1. This appeal has been filed by the Assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short], dated 31/11/2023 for Assessment Year 2015-16. 2 ITA No.3884/Del/2023 Kautilya Shares and Stocks Private Limited vs. ITO 2. The brief facts relating to the various grounds raised by the assessee and the common grievance raised by the assessee are against rectification order passed u/s 154 of the Income Tax Act (‘the Act’ for short) by the Assessing Officer. The basic facts of the issue involved in this case are, the assessee filed its return of income of Rs.39,70,830/- as per normal provision of the Act, income declared under book profit was Rs.60,76,753/-. The Assessing Officer completed the assessment u/s 143(3) of the Act on 28/12/2017 accepting the return of income. Thereafter, the Assessing Officer observed that the assessee has declared long term capital gain of Rs.1,65,27,700/- on transfer of agricultural land. Accordingly, he passed a rectification order u/s 154 of the Act to bring the above said capital gain taxable under the book profit assessable u/s 115JB of the Act. 3. It is relevant to observe from the assessment record that the case was selected for limited scrutiny under CASS for the reason of income from heads of income other than business/profession mismatch, sales turn over mismatch and investment in unlisted equities. In the rectification order, the Assessing Officer observed 3 ITA No.3884/Del/2023 Kautilya Shares and Stocks Private Limited vs. ITO that as per the provisions of Section 115JB of the Act, while computing the book profit for the purposes of MAT, the income exempt u/s 10 other than Section 10(38), Section 11 and Section 12 are to be reduced. He observed that the income earned on transfer of agricultural land is not covered under the provisions of section 10, 11 and 12 of the Act. The income of sale of agricultural land is not taxable under normal provisions of Income Tax Act, at the same is not included in the definition of capital asset as contained in Section 2(14) of the Act. There is no provision in Section 10, 11 and 12 of the Act whereby the income on sale of agricultural land is covered. Therefore, he proceeded to make the above addition in the book profit u/s 115JB of the Act. Accordingly, he included the capital gain derived by the assessee under the book profit and brought to tax. 4. Aggrieved with the above order, the assessee preferred an appeal before the NFAC, Delhi and raised several grounds similar to the grounds raised before us. 5. After considering the detailed submissions of the assessee, the Ld. CIT(A) provided several hearing opportunities to submit 4 ITA No.3884/Del/2023 Kautilya Shares and Stocks Private Limited vs. ITO documents in support of various grounds raised by the assessee. Since, no response came from the assessee side. The Ld. CIT(A) dismissed the same and sustained the addition on merit made by the Assessing Officer. 6. Aggrieved with the above order, the assessee is in appeal before us raising the following grounds of appeal:- “1. On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is non-est as it does not have DIN on the body of the assessment order and CIT(A) erred in not holding so. 2. On the facts and circumstances of the case and in law, the rectification order passed u/s 154 by the assessing officer and the addition made therein are bad-in-law and without jurisdiction and CIT(A) erred in not holding so. 3. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming addition of Rs. 1,65,27,700/- made by the assessing officer for the purpose of computation of book profit u/s 115JB is beyond the scope of provision of section 154 of the Act. 4. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming addition of Rs. 1,65,27,700/-made by the assessing officer on account of gain on transfer of agriculture land for the purpose of computation of income w/s 115JB of the Act. 5. On the facts and circumstances of the case and in law, the CIT (A) erred in passing ex-parte order. 6. On the facts and circumstances of the case and in law, the order passed by CIT (A) is against the principles of natural justice. 7. On the facts and circumstances of the case and in law, the CIT (A) erred in passing order without providing proper opportunity of being heard. 8. On the facts and circumstances of the case and in law, the CIT (A) erred in not adjudicating the grounds of appeal on merit.” 5 ITA No.3884/Del/2023 Kautilya Shares and Stocks Private Limited vs. ITO 7. At the time of hearing, the Ld. AR submitted that ground No.1 is not pressed by the assessee. Accordingly, the same is dismissed as such. The other grounds raised by the assessee more or less same as raised before the Ld. CIT(A). 8. The Ld. AR submitted that the Assessing Officer completed the assessment u/s 143(3) of the Act by accepting the return of income after considering the submissions of the assessee. It is important to note that the case was selected for limited scrutiny and the Assessing Officer preferred to issue notice u/s 154 of the Act on the ground that profit on sale of agricultural land was to be included in book profit u/s 115JB of the Act. 9. In response, the assessee submitted that there was no mistake apparent from the record and also the case was selected for limited scrutiny, the Assessing Officer cannot make any addition on other issue which are not the reasons covered in initiating the limited scrutiny. However, the Assessing Officer rejected the same and proceeded to make the addition as per the notice issued u/s 154 of the Act. The Ld. AR submitted that profit on sale of agricultural 6 ITA No.3884/Del/2023 Kautilya Shares and Stocks Private Limited vs. ITO land is not part of book profit u/s 115JB of the Act. Considering the facts that agricultural land is not a capital asset as per the provision of section 2(14) of the Act. In this regard, he relied on the following case laws:- - Harisons Malayalam Ltd. and Ors. vs. ACIT, 2009 (5) TMI 124-ITAT Coachi - A.V. Thoms Lether and Allied Products Pvt. Ltd. vs. DCIT, 2016 (3) TMI 744-ITAT, Chennai - ACIT vs. Nilgiri Tea Estate Ltd., 2012(2) TMI 553-ITAT Cochin - ITO vs. Gomantak Eximis Ltd., 2018 (5) TMI 1870 –ITAT Delhi - DCIT vs. Motisons Builtech Pvt. Ltd. 2020 (2) TMI 1141- ITAT Jaipur 10. Further, he submitted that the jurisdiction u/s 154 is confined and restricted to rectification of errors and mistakes apparent from record, the Assessing Officer cannot invoke on the issues which are debatable. In this regard, he relied on the following case laws:- -CIT vs. RTCL Ltd. (4) TMI 287-Delhi High Court -TS Balram, ITO vs. Volkart Brothers and Ors. 1971(8) TMI 3-Supreme Court 11. Further, he submitted that the case was selected for limited scrutiny and the issue of capital gain on sale of property being part of book profit u/s 115JB was not the issue/ground of selection of case under limited scrutiny. Therefore, such issue could not have 7 ITA No.3884/Del/2023 Kautilya Shares and Stocks Private Limited vs. ITO been taken by invoking provisions of section 154 of the Act. In this regard, he relied on the following case law:- -CIT vs. Best Plastics Pvt. Ltd. [2006] (4) TMI 53- High Court Delhi -Shivalik Education and Placement Services Pvt. Ltd. vs. ACIT [2023] (12) TMI 1117 –Delhi ITAT -Late Smt. Gurbachan Kaur vs. DCIT [2019] (12) TMI 495- Jaipur ITAT 12. On the other hand, the Ld. DR submitted that no doubt the case was selected for limited scrutiny and it is fact on record that the profit and sale of agricultural land is exempt from income tax, however, the profit earned by the assessee which are part of the book profit cannot be eliminated for determining the tax under MAT. Further, he submitted that the assessee has not complied to the hearing notices issued by the Ld. CIT(A) and not submitted any documents or plea before Ld. CIT(A), therefore, the issue may be remitted back to the file of Ld. CIT(A). 13. Considered the rival submissions and material placed on record. It is fact on record that the assessee has filed the appeal before the Ld. CIT(A) and submitted the detailed facts on record. However, the assessee has not complied to the various notices issued by the Ld. CIT(A) and Ld. CIT(A) dismissed the appeal of the 8 ITA No.3884/Del/2023 Kautilya Shares and Stocks Private Limited vs. ITO assessee by observing that the assessee has not filed relevant document in support of its claim and he also dismissed the appeal on merits. 14. We considered remitting the issue back to the file of Ld. CIT(A), however, we observed that there is no dispute as far as the profit earned by the assessee on sale of agricultural land which is exempt from income tax. It is also not in dispute that the Assessing Officer has accepted the income earned by the assessee while assessing tax u/s 143(3) of the Act, however, raised the issue of taxable u/s 115JB of the Act under rectification proceedings. As far as the issue under consideration is whether the profit earned by the assessee which is not a capital assets as per the normal provision of the Act and the same was allow to be claimed under normal provisions of the Act, whether the same income can be charged to tax under MAT. Since, the issue under consideration is very much covered in favour of the assessee. We do not see any reason to remit the issue back to the file of the Ld. CIT(A) and can be disposed off by considering the relevant material available on record. We considered the submissions of the assessee and 9 ITA No.3884/Del/2023 Kautilya Shares and Stocks Private Limited vs. ITO observed various benches of the ITAT had considered the similar issue and decided the issue in favour of the assessee. In the case of Harisaons Malayalam Ltd. and Ors. vs. ACIT and Ors. in [2009] 315 ITR (A-T) 1 (ITAT Cochin), in which the Bench has decided the following issues and decided the same as under:- “Computation of book profit u/s 115JB-AO added profit on sale of one of its rubber estate as forming part of the book profit. The contention of the assessee was that the profit arising on the sale of its Rubber Estate was agricultural income and therefore it was outside the scope and purview of the book profit u/s 115JB. But this contention was not accepted by CIT(A). HELD THAT:- Obviously, the profit on sale of agricultural land is agricultural income and the court further held that standing trees also form part of the immovable property and therefore contributed to agricultural income alone. The Hon'ble Supreme Court in the case of CIT v. All India Tea and Trading Co. Ltd. [1996 (3) TMI 4-SUPREME COURT) has held that the compensation received on requisition of agricultural land amounted to agricultural income. The Supreme Court again in the case of Singhai Rakesh Kumar v. Union of India (2000 (11) TMI 2-SUPREME COURT] has held that the income arising out of the transfer of such agricultural lands are not exigible to capital gains as they are in the nature of agricultural income. Assessee has sold a rubber estate with standing trees and all other paraphernalia known as "Boyce Estate". There is no dispute that the said estate was in a rural area and outside the purview of any municipal limit. Therefore, in the light of the judgment of the Supreme Court and the hon'ble jurisdictional High Court in the case of CIT v. Alanickal Co. Ltd. [1986 (1) TMI 94- KERALA HIGH COURT), it is to be held that the profits arising from the sale of the rubber estate to the assessee on transfer of the said rubber estate amounted to agricultural income as provided u/s 2(1A). It is a clear case that the profit accounted by the asses-see on sale of "Boyce Estate" should not be considered for the purposes of computing book profit u/s 115JB. Accordingly, AO directed to exclude the profit on sale of "Boyce Estate" from computing book profit for the purposes of Section 115JB. This issue is decided in favour of the assessee and ground Nos. 2 and 3 are accordingly allowed.” 10 ITA No.3884/Del/2023 Kautilya Shares and Stocks Private Limited vs. ITO Similarly, in the case of ACIT vs. Nilgiri Tea Estate Ltd. in ITA No.377/Coch/2010 dated 29/02/2012, similar issue was considered and decided by the Bench as under:- “3. We have heard the parties, and perused the material on record. The Revenue's stand is that profit or loss on the disposal of an asset is to be duly incorporated in the Profit & Loss Account of a company prepared in accordance with Parts II & III of Schedule VI to the Companies Act, 1956, the net profit per which is to be adopted by it for computing the 'book profit under the MAT provisions, including s. 115JB. As such, there is no basis for excluding the profit derived on the sale of its agricultural land by the assessee. Further, there is no question of the same being exigible for deduction on account of sec. 10 of the Act, which makes no reference to the said income. The assessee, on the other hand, relies on the decision by the tribunal in the case of Harrisons Malayalam Ltd. vs. ACIT (supra), per which the said profit has been held as not liable to book profit tax u/s. 115JB. The Revenue, however, prefers with its view as the matter has been, as stated, carried by it in appeal before the hon'ble high court. The tribunal has, in rendering its said decision, relied on the decisions by the apex court in the case of Singhai Rakesh Kumar v. Union of India (2001) 247 ITR 150 (SC) and CIT v. All India Tea and Trading Co. Ltd. (1996) 219 ITR 544 (SC), holding that the income arising on the transfer of agricultural land is not exigible to capital gains tax, being in the nature of agricultural income. Firstly, as such, there is complete parity of facts, so that we find no reason to take a different view of the matter. Secondly, the Revenue's objection is technical in nature inasmuch it concedes that the income is otherwise not chargeable to tax under the regular provisions of the Act. The provisions of Chapter XII-B of the Act do not, in our view, operate to extend the scope of total income' per section 5 on which the charge to tax u/s. 4 is attracted, but is only toward providing an alternative basis for computing the same. Reference by the Id. CIT(A) to the Circular No. 550 by the Board in this regard is in our view apposite, the receipt being admittedly a capital receipt. We therefore following the decision by the tribunal in the case of Harrisons Malayalam Ltd. vs. ACIT (supra). delete the inclusion of profit of 23.69 lakhs on account of sale of agricultural land, admittedly not a capital asset u/s. 2(14), in the computation of book profit u/s. 115JB of the Act. We decide accordingly” 11 ITA No.3884/Del/2023 Kautilya Shares and Stocks Private Limited vs. ITO Similarly, in the case of ITO vs. Gomantak Exims Ltd. in ITA No. 2708/Del/2012 dated 15/05/2018 in the Revenue appeal, the issue was decided in favour of the assessee:- “19. Coming to the issue of 115JB as raised in ground No. 3, we find that, firstly, neither the issue of computation or taxation of book profit u/s. 115JB has been raised by the Assessing Officer, nor such grounds were raised in the original grounds of appeal by the Department. Apart from that, once Assessing Officer has not treated the said gain for the purposes of book profit then by way of such ground the issue cannot be raised by the Department. Otherwise also when the income of agricultural land is exempt from tax, then the said exempt income cannot be added to the books profit while calculating the MAT u/s. 115JB. Thus, the said ground raised by the Revenue cannot be entertained and same is dismissed.” Respectfully following the above decisions, we are inclined to allow the ground No.4 raised by the assessee. However, other grounds raised by the assessee are not adjudicated at this stage. 15. In the result, the appeal filed by the assessee is partly allowed. Order pronounced on 21 st June, 2024. Sd/- Sd/- (MADHUMITA ROY) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 21/06/2024 Pk/sps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 12 ITA No.3884/Del/2023 Kautilya Shares and Stocks Private Limited vs. ITO 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI