ITO,WARD-4(1), Nagpur V. SHRI VIKESH CHATURBHUJ AGRAWAL, Nagpur

ITA 390/NAG/2013

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8860 (ITAT-NAGPUR)
• Duration Of Justice: 6 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 30-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR MILIND BHUSARI
• Keywords: Capital asset; Business income; Principle of natural justice; Earning of tax free income; Additional evidence; Set aside
• Section: 2(14); 13

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL BENCH, NAGPUR (AT E - COURT, PUNE) BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO. 390 /NAG /20 13 / ASSESSMENT YEAR : 2009 - 10 THE INCOME TAX OFFICER, WARD - 4(1), NAGPUR. ....... / APPELLANT / V/S. SHRI VIKESH CHATURBHUJ AGRAWAL, 23, SHRADHA, MIDDLE RING ROAD, WARDHAMAN NAGAR, NAGPUR - 440 008 PAN: ABJPA9338H / RESPONDENT A SSESSEE BY : SHRI NILESH SINDHWANI REVENUE BY : DR. MILIND BHUSARI / DATE OF HEARING : 1 4 .01.2020 / DATE OF PRONOUNCEMENT : 14 .01.2020 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THIS APPEAL PREFERRED BY THE REVENUE EMANATES FROM THE ORDER OF THE LD. CIT(APPEALS) - II, NAGPUR DATED 07.08.2013 FOR THE ASSESSMENT YEAR 2009 - 10 AS PER THE FOLLOWING GROUNDS OF APPEAL ON RECORD: 2 ITA NO. 390 /NAG /20 13 A.Y. 2009 - 10 1(A) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IS CORRECT IN DELETING THE ADDITION OF RS.1,89,36,900/ - ON ACCOUNT OF BUSINESS INCOME WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE IS NOT EARNING AGRICULTURAL INCOME FROM LAND, ALSO THE SOLE INTENTION OF THE ASSESSEE IS TO EARN PROFIT ON SALE OF LAND. 1(B) WHETHE R ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN NOT CONSIDERING THAT ASSESSEE ENGAGED IN PURCHASE AND SALE OF AGRICULTURAL LAND SITUATED IN COMMERCIALLY VIABLE AREA AND THE BUSINESS OF THE ASSESSEE IS PURCHASE AND SALE OF LAND . 2. WHETHER ON THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN LAW, THE CIT(A ) ERRED IN ALLOWING CLAIM OF ASSESSEE OF RS.5,00,000/ - AS COMMISSION ON SALE OF AGRICULTURAL LAND BY ADMITTING ADDITIONAL EVIDENCES IN CONTRAVENTION OF RULE 64A AND ALSO IN CONTR AVENTION OF HIS OWN FINDING THAT LAND SOLD IS EXEMPT BEING AGRICULTURAL LAND WHILE EXPENSES ON ITS IMPROVEMENT ARE ALLOWED. 3. ANY OTHER GROUND OF APPEAL THAT MAY BE RAISED FROM TIME TO TIME DURING THE COURSE OF APPELLATE PROCEEDINGS. 2. THE BRIEF FAC TS IN THIS CASE ARE THAT THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.3,88,580/ - WAS FILED ON 27.09.2009. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD ENTERED INTO SEVERAL SALE TRANSACTIONS O F AGRICULTURAL LANDS ON WHICH HE HAS SHOWN GAIN OF RS.1,89,36,900/ - AS PER THE FOLLOWING TABLE: SR NO DESCRIPTION OF LAND TRANSACTIONS EXPENSES EXEMPT PROFIT TAXABLE LTCG PURCHASE AMOUNT PURCHASE DATE SALE AMT. SALE DATE ON TRANSFER ON SALE U/S. 2(14) 1 HINGANA (311) 1010500.00 22.05.2006 10110000.0 0 09.01. 2009 1225000. 00 7775033 .00 2 HINGNA ( 304) - 50% 1895200.00 05.06.2007 3350000.00 09.01. 2009 300000.0 0 1055333 .00 3 KIRMITI (32) 210700.00 04.10.2006 292000.00 27.05. 2008 0.00 81300.0 0 4 HINGNA (310) - 50% 3660000.00 01.03.2008 5750000.00 27.11. 2008 150000.0 0 1839200 .00 5 HINGNA (318) - 50% 2150200.00 01.03.2008 4350000.00 26.12. 2008 225000.0 0 1874000 .00 3 ITA NO. 390 /NAG /20 13 A.Y. 2009 - 10 6 KIRMITI - 32/2 - 50% 102000.00 15.10.2007 162000.00 27.05. 2008 0.00 60000.0 0 7 KIRMITI - 31 425000.00 09.06.2007 534000.00 27.05. 2008 0.00 109000. 00 8 HINGANA (317) 607500.00 7450000.00 26.12. 2008 600000.0 0 6143034 .00 9 GODHANI 63200.00 19.04.2005 100000.00 24.12. 2008 0.00 36,800. 00 GRAND TOTAL 20001590. 00 32098000. 00 2500000 .00 189369 00.00 36800. 00 3. THE LANDS WERE AGRICULTURAL LANDS AND THE ASSESSEE HAD SHOWN THE GAIN ARISING ON SALE OF THE LANDS AS EXEMPT INCOME U/S.2(14) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). CONSIDERING THE FREQUENCY OF THESE TRANSACTIONS AND THE PERIOD OF HOLDING, THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE AS TO WHY THE SAID GAIN SHOULD NOT BE TREATED AS BUSINESS INCOME. DETAILED SUBMISSIONS WERE MADE BY THE ASSESSEE IN THIS REGARD STATING THAT THE LANDS SOLD WERE NOT A CAPITAL ASSET AND AS SUCH NOT LIABLE FOR CAPITAL GAIN AND ARE SPECIFICALLY EXEMPT U/S.2(14) OF THE ACT BEING AGRICULTURAL INCOME AND THAT SURPLUS ARISING FROM THE SALE OF LAND USED FOR AGRICULTURAL PURPOSE WHICH ARE LOCATED OUTSIDE THE MUN ICIPAL LOCALITY AND NOT WITHIN THE RADIUS OF 8 KMS. OF ITS LIMIT IS AGRICULTURAL LAND. 4. THE ASSESSING OFFICER DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE AND TREATED THE SAID GAIN TO BE THE BUSINESS INCOME OF THE ASSESSEE. THE MAIN REASONS AS STATED BY THE ASSESSING OFFICER ARE THE HIGH FREQUENCY OF SALE TRANSACTIONS AND THE SHORT PERIOD OF HOLDING. IT IS STATED BY THE ASSESSING OFFICER THAT THE SHORT PERIOD OF HOLDING IN THE ASSESSEES CASE SHOWS THE INTENTION OF THE ASSESSEE. THE ASSESSING OFFICER Q UOTED THAT MULTIPLE TRANSACTIONS OF PURCHASE AND SALE HAVE BEEN CARRIED OUT IN EARLIER YEARS AND THAT THE LAND WAS SITUATED IN HINGANA IN NAGPUR WHICH IS THE 4 ITA NO. 390 /NAG /20 13 A.Y. 2009 - 10 FASTEST DEVELOPING CITY DUE TO THE PRESTIGIOUS PROJECTS THAT ARE COMING IN NAGPUR. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE HAD NO INTENTION TO CARRY OUT ANY AGRICULTURAL ACTIVITY ON THESE LANDS AND IN HIS STATEMENT U/S.131 OF THE ACT, THE ASSESSEE STATED THAT HE ALONG WITH HIS CO - OWNER WANTED TO SET UP AN INDUSTRIAL UNDERTAKING ON THESE AGR ICULTURAL LANDS. THE ASSESSING OFFICER ALSO QUOTED THAT THE ASSESSEES NATURE OF TRANSACTION AND MANNER OF TRANSACTIONS, IT IS CLEAR THAT THE LAND HAS BEEN TREATED AS A TRADING ASSET AND WAS ACCORDINGLY BROUGHT AND SOLD BY THE ASSESSEE AND THE ASSESSEES P LEA THAT THIS GAIN SHOULD BE EXEMPT IS COMPLETELY AGAINST THE PARLIAMENTS INTENTION OF EXEMPTING GAIN RECEIVED OF RS.1,89,36,900/ - AND THEREFORE, THE ASSESSING OFFICER ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5. THE LD. CIT(APPEALS) AS EVIDEN T AT PARA 6.7 OF THIS ORDER HAS MAINLY BASED HIS DECISION CONCENTRATING ON THE CHARACTER OF THE LAND AND DECIDED THAT IT IS AN AGRICULTURAL LAND AND PLACED STRONG RELIANCE ON THE 7/12 EXTRACT AND PROVIDED RELIEF TO THE ASSESSEE. THE DETAILS REASONING IS M ENTIONED IN THE ORDER OF THE LD. CIT(APPEALS) WHICH IS ON RECORD. 6. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS. WE FIND THAT THE LD. CIT(APPEALS) PROVIDED RELIEF TO THE ASSESSEE STATING THE LAND TO BE AGRICULTURAL LAND BASED ON 7/12 EXTRACT . HE HAS NOT COME OUT WITH A SPEAKING ORDER SPECIALLY WHEN THE ASSESSING OFFICER HAS NOTICED THAT THERE IS HIGH FREQUENCY OF PURCHASING A ND SALE OF LAND BY THE ASSESSEE AS IS EVIDENT FROM THE TABLE REPRODUCED HEREINABO VE IN THE PRECEDING PARAGR APHS OF THIS ORDER WHICH IS ALSO PART OF THE RECORD AS APPEARING IN THE ASSESSMENT ORDER AS WELL AS IN THE ORDER OF THE LD. CIT(APPEALS). THE ASSESSEE COULD NOT EXPLAIN BEFORE THE ASSESSING OFFICER AS TO WHY THERE IS SUCH NEED FOR FREQUENT SALE AND PURCHA SE OF THE LAND IF THEY ARE KEPT FOR INVESTMENT. THAT FURTHER IN THE STATEMENT RECORDED U/S.131 OF THE ACT, THE ASSESSEE HIMSELF HAS 5 ITA NO. 390 /NAG /20 13 A.Y. 2009 - 10 DECLARED BEFORE THE ASSESSING OFFICER THAT HE ALONG WITH HIS CO - OWNER WANTED TO SET UP AN INDUSTRIAL UNDERTAKING ON THESE AGRICULTURAL LANDS. INSTEAD OF PROVIDING CATEGORICAL ANSWER TO THE QUESTION OF ASSESSING OFFICER REGARDING SUCH FREQUENCY OF PURCHASING AND SALE OF LAND, ASSESSEE STATED THAT HE HAS ACTUALLY BUS INESS OF TRADING OF CELLU LA R PHONE. THAT FURTHER, THESE LANDS WERE DECLARED UNDER FIXED ASSET IN THE BALANCE SHEET ANNEXED WITH THE INCOME TAX RETURN AND IS BASICALLY FOR THE PURPOSE OF INVESTMENT AND NOT FOR THE PURPOSE OF BUSINESS. WHEN WE PERUSE THE FIN DINGS OF THE LD. CIT(APPEALS), HE HAS ONLY DWELLED UPON THE CHARACTERISTIC OF THE LAND BEING AGRICULTURAL AS PER 7/12 EXTRACT WHILE PROVIDING RELIEF TO THE ASSESSEE. BUT HE HAS NOT CATEGORICALLY STATED OR GIVEN ANY FINDINGS WITH REGARD TO THE FREQUENCY OF PURCHASING AND SALE OF THE LAND BY THE ASSESSEE. IN OUR CONSIDERED VIEW, THE LAND MAY BE AGRICULTURAL LAND BUT THAT SUO - MOTO CANNOT MAKE THE INCOME EXEMPT WITHIN THE PURVIEW OF THE STATUTE IF THE ACTION OF THE AS SESSEE SUGGEST S THAT HE HAS CONDUCTED BUSIN ESS IN RESPECT OF THOSE AGRICULTURAL LANDS. IN THIS CASE, REGARDING THE FREQUENT PURCHASING AND SALE OF THE LANDS, THE LD. CIT(APPEALS) HAS NOT GIVEN ANY REASONED FINDINGS. IN VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE LD. CIT(APPEALS) AND REMIT TH E MATTER BACK TO HIS FILE TO PASS A SPEAKING ORDER AS REGARDS TO THE NATURE OF ACTIVITIES/TRANSACTIONS CONDUCTED BY THE ASSESSEE VIS - - VIS THE SAID LANDS AND ADJUDICATE THE MATTER AFTER COMPLYING WITH THE PRINCIPLES OF NATURAL JUSTICE. THUS, GROUND NO.1 RA ISED IN APPEAL BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 7. GROUND NO.2 , IT IS WITH REGARD TO THE ADMISSION OF ADDITIONAL EVIDENCES IN CONTRAVENTION TO RULE 46A. SINCE THE MAJOR ISSUE IN THIS APPEAL IS RESTORED TO THE FILE OF THE LD. CIT(APPEAL S), THIS GROUND BEING INTER CONNECTED IS ALSO REMITTED BACK TO THE FILE OF LD. CIT(APPEALS) TO ADJUDICATE THE MATTER AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE IN TERMS OF THE PROVISIONS OF RULE 46A OF THE 6 ITA NO. 390 /NAG /20 13 A.Y. 2009 - 10 ACT. THUS, GROUND NO.2 RAIS ED IN APPEAL BY THE REVENUE IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED ON 14 TH DAY OF JANUARY, 2020 . SD/ - SD/ - D. KARUNAKARA RAO PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 14 TH JANUARY , 20 20 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - II, NAGPUR. 4. THE CIT - II, NAGPUR. 5 . , , / DR, ITAT, NAGPUR. 6. / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE . 7 ITA NO. 390 /NAG /20 13 A.Y. 2009 - 10 DATE 1 DRAFT DICTATED ON 14 .01.2020 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 1 4 .01.2020 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER