Anu Singhi, Sirhind V. I.T.O.. Ward, Sirhind

ITA 420/CHANDI/2022

AI Insights

The case revolves around the appeal by Anu Singhi against the order of the PCIT, Patiala, which was passed under section 263 of the Income Tax Act, 1961 for the assessment year 2017-18. The PCIT had contended that the assessee was in the business of buying and selling land, as evidenced by multiple transactions in selling a single property, and thus the gains should be treated as business income. The assessee argued that the transactions were not business activities but were sales of agricultural land, which should be taxed under long-term capital gains. The ITAT examined the facts, including the nature of the land and the transactions, and concluded that the PCIT's order was not justified.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128422 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-03-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 08-05-2022
• Other Referred Cases: Shri Dilip Sangoi vs. DCIT, Shri Arvind Sangoi vs. DCIT, Shri Rupinder Singh Gill vs. ACIT, Kaur Singh vs. CIT, CIT vs. Harjit Singh Sangha
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Set aside; Capital Gains
• Section: 145; 263; 142(1); 13

Judgement Text

आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ,चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, “A”, CHANDIGARH BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER & SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकरअपीलसं./ITA No.420/CHD/2022 Ǔनधा[रणवष[ / Assessment Year :2017-18 Anu Singhi, H.No.4370A, Khalsa Colony, Vill. Barra, Sirhind-140406 Distt. Fatehgarh Sahib (Pb) बनाम The ITO, Ward, Sirhind èथायीलेखासं./PAN NO: AQJPS 8656H अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent Ǔनधा[ǐरतीकȧओरसे/Assessee by :Sh. Tej Mohan Singh, Advocate राजèवकȧओरसे/ Revenue by : Sh. Vivek Nangia, CIT DR स ु नवाईकȧतारȣख/Date of Hearing :14.03.2023 उदघोषणाकȧतारȣख/Date of Pronouncement :06.06.2023 आदेश/Order Per Sudhanshu Srivastava, Judicial Member: This appeal is preferred by the assessee against order dated 29.03.2022 passed by the Pr. Commissioner of Income Tax, (PCIT), Patiala, for A.Y. 2017-18. 2.0 In the present appeal, the assessee has challenged the impugned order passed u/s. 263 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). ITA No. 420-Chd-2022 (A.Y. 2017-18) - Anu Singhi, Sirhind 2 3.0 The brief facts of the case are that the return of income for the captioned year had been filed declaring taxable income at Rs.23,49,550/-. The return was initially processed u/s.143(1) of the Act and subsequently, the case was selected for scrutiny through CASS. The assessment was completed after accepting the returned income. 3.1 Subsequently, the ld. PCIT issued notice u/s. 263 of the Act, on the ground that the assessee had sold certain properties during the captioned assessment year and had computed Long Term Capital Gain and had also paid Long Term Capital Gain Tax, but, the impugned property had been sold in piecemeal, in 14 transactions. The ld. PCIT was of the view that this indicated that the assessee was in the business of buying and selling land/properties. The ld. PCIT also noted that even in the Assessment Years 2015-16 and 2016-17, the assessee had declared Capital Gain and in view of repetitive transactions of the same nature, the properties held by the assessee were stock-in-trade and not capital asset and, therefore, benefit of indexation was not to be made available to the assessee. The assessee was required to show cause as to why the assessment framed was not erroneous inasmuch as being prejudicial to the interest of the Revenue. ITA No. 420-Chd-2022 (A.Y. 2017-18) - Anu Singhi, Sirhind 3 3.2 In response to the show cause notice, it was the assessee’s submission before the ld. PCIT that the assessee was not conducting any regular business in buying and selling of immovable property and further the Assessing Officer had duly verified the issue during the course of assessment proceedings and, therefore, revisionary proceedings were not required. 3.3 This contention of the assessee did not find favour with the Ld. PCIT and he observed that the Assessing Officer had not obtained any explanation from the assessee regarding the nature of business i.e. buying and selling of land/property by the assessee and further, the Assessing Officer had not considered attributes of the land like location, nature of the land etc. and that the Assessing Officer had also not examined the past profile of the assessee. The ld. PCIT invoked Explanation-2 of Section 263 of the Act and held that the assessment in this case was erroneous as well as prejudicial to the interest of the Revenue. The ld. PCIT set aside the order of the assessment and directed the Assessing Officer to pass a fresh order in respect of the issue raised in the show cause notice. ITA No. 420-Chd-2022 (A.Y. 2017-18) - Anu Singhi, Sirhind 4 4.0 Aggrieved, the assessee has now approached this Tribunal, (ITAT), challenging the order of the ld. PCIT by raising the following grounds of appeal: 1. That the order of the Ld. P.C.l.T. is against the facts of the case and is bad in law as he is not justified to arbitrarily hold that the assessment order dt. 11.10.2019 passed by the Income Tax Officer, Sirhind is erroneous and prejudicial to the interest of the revenue. 2. That on the facts & circumstances of the case, the Ld. P.C.l.T. has erred, in holding that the appellant is engaged in the business of real- estate and has further erred in treating the long term capital gain on sale of land as business income of the appellant. 3. That the appellant craves leave to add, amend or delete any of the grounds of appeal before the same is finally heard & disposed off.” 5.0 The ld. Authorized Representative submitted that the Assessing Officer had completed the assessment proceedings after due and proper verification of the documents. He drew our attention to the paper book filed by the assessee and specifically pointed out to the copy of notice dated 09.01.2019 issued u/s. 142(1) of the Act by the Assessing Officer along with the questionnaire and the replies of the assessee dated 04.03.2019 and 26.07.2019 filed by the assessee before the Assessing Officer in response to the ITA No. 420-Chd-2022 (A.Y. 2017-18) - Anu Singhi, Sirhind 5 queries raised by the Assessing Officer. It was submitted that the allegation of the ld. PCIT that the Assessing Officer had not raised any query or made any enquiry on the issue was factually incorrect. It was submitted that the Assessing Officer had duly raised the query and the assessee had duly replied to the same and, therefore, invocation of revisionary jurisdiction by the ld. PCIT was legally incorrect and the impugned order was liable to be quashed. The ld. AR further submitted that it was only after the examination of the various documents, sale deeds etc. filed by the assessee the Assessing Officer had a formed an opinion that the income declared by the assessee was taxable under the head Long Term Capital Gain. 5.1 It was submitted that it was one of the plausible views taken by the Assessing Officer and that the ld. PCIT had no power to overturn the view taken by the ld. Assessing Officer. It was submitted by the ld. Authorized Representative that whether an income was taxable as business income or as Capital Gain was a matter of subjective opinion having regard to the facts of the given case and provisions of Section 263 of the Act did not empower the ld. PCIT to invoke his revisional powers to substitute his opinion on a debatable issue without showing ITA No. 420-Chd-2022 (A.Y. 2017-18) - Anu Singhi, Sirhind 6 as to how the Assessing Officer had committed an error in adopting one of the plausible views. 5.2 Reliance was placed on the order of the Raipur Bench of ITAT in the cases of Shri Dilip Sangoi vs. DCIT in ITA No. 34/RPR/2021 and Shri Arvind Sangoi vs. DCIT in ITA No. 33/RPR/2021. Reliance was also placed on order of ITAT, Chandigarh Bench in the case of Shri Rupinder Singh Gill vs. ACIT in ITA No. 298/Chd/2013 and it was argued that plausible view taken in exercise of a quasi judicial function cannot be dislodged in a light hearted manner in the name of inadequacy in enquiries as perceived by the revisional authority and that further the revisional powers cannot be exercised for directing a fuller enquiry to merely find out whether the earlier view taken was erroneous. 6.0 Per contra, the ld. CIT(DR) vehemently supported the impugned order and submitted that the act of the assessee in selling a plot through twenty or so odd transactions indicated the intention of the assessee to conduct the business of selling of property/land and it is this aspect, which the ld. PCIT has pointed out in the impugned order, which the Assessing Officer has failed to enquire into. It was argued that the Assessing Officer had made no enquiry into the nature of transactions being entered into by the assessee ITA No. 420-Chd-2022 (A.Y. 2017-18) - Anu Singhi, Sirhind 7 and that he had simply accepted the version of the assessee and completed the assessment at the returned income without actually enquiring into the nature of transactions and/or the head of income under which the transactions should have been taxed. 7.0 We have heard the rival submissions and have also perused the material placed on record. We have also gone through the questionnaire issued by the Assessing Officer and the replies filed by the assessee in response to the various queries raised by the Assessing Officer. We have also gone through the copies of the sale deeds through which the assessee had sold the land in numerous transactions and we note that in all the sale deed the impugned land has shown as agricultural land. We note that the impugned piece of land was purchased in 2010 (which even the ld. PCIT has noted in the impugned order) and it was only during Assessment Year 2017-18, that the assessee had sold some portion of the land in 14 transactions of small holdings. Thus, admittedly, and undisputedly, the assessee had been holding this piece of land for over six years and nothing has been brought on record to demonstrate that the assessee had purchased this land with the intention to enter into the business of buying/selling of property of the land i.e. when ITA No. 420-Chd-2022 (A.Y. 2017-18) - Anu Singhi, Sirhind 8 it was purchased and when it was sold. In both the years, it continued to be in the nature of agricultural land. On such facts, we are not in a position to concur with the observations of the ld. PCIT that the assessee was in the business of buying and selling of property. It appears that the ld. PCIT has been influenced by the fact that one piece of land was sold through 14 transactions. However, in our considered view, on the facts and circumstances of the case, the ld. PCIT was not justified in invoking his revisionary power to hold that the Assessing Officer should have treated the income as income from business of buying and selling of property. 7.1 At this juncture, reference may be drawn to the judgment of the Hon'ble Punjab and Haryana High Court in the case of Kaur Singh vs. CIT reported in 144 ITR 756 (1983) (P&H) wherein the Hon'ble Jurisdictional High Court, on a similar set of facts, had held as under: “11. Keeping in view the principles enunciated by the Supreme Court, we shall now independently examine whether on the facts found by the Tribunal, the sale was an adventure in the nature of trade. A bare analysis of the facts found by the Tribunal would show that for arriving at this conclusion that it was an adventure in the nature of trade, the Tribunal was mainly influenced by the fact that out of the land attached to the Krishan Bagh Kothi, 42 plots of 2000 sq. yards each have been earmarked for sale; that in the year in question 7 plots were sold for Rs. 18,500 and that advances were received in respect of other ITA No. 420-Chd-2022 (A.Y. 2017-18) - Anu Singhi, Sirhind 9 plots. In our view, on the basis of these facts alone, no such inference could legally be drawn that the transaction in dispute has the character of a trade in nature. The assessee admittedly had purchased the property in the year 1967. The Revenue has not at all brought any circumstance or evidence on the, record to show that at the time of the purchase of the property in the year 1967, the assessee had an intention to sell the property. Merely carving out plots in a portion of the land, without proof of anything more, cannot give rise to the conclusion that the transaction is an adventure in the nature of trade. Our attention was pointedly drawn by the Ld. counsel for the Revenue to a Division Bench judgment of this Court in Harballns Singh vs. CIT (1981)23 CTR (P&H) 335 (1981)132 ITR 77 (P & H). But the decision is of no assistance to the Revenue as the facts of that case are entirely different and on the facts found in that case, the view was rightly taken that it was an adventure in the nature of trade. There can be no gainsaying that even a single venture may be regarded as a trade or business, but there have to be circumstances which may give rise to such a conclusion. As earlier observed, in this case the Tribunal has fallen in error in holding the venture as a trade or business merely on the ground that 42 plots were carved out, of which 7 were disposed of in the year in question. In this view of the matter, in the circumstances of the case and on the facts found. the Tribunal was not right in law in holding that the income derived by the assessee from the sale of plots were from an adventure in the nature of trade. Consequently, the answer to this question is returned in favour of the assessee and against the Revenue." 7.2. It is also worthwhile to refer to another judgment of the Hon'ble jurisdictional High Court in the case of CIT vs. Harjit Singh Sangha in ITA No. 16 of 2012 (P&H), wherein the Hon'ble High Court had held as under: “6. The Tribunal also on appreciation of material on record came to the conclusion that it was not ITA No. 420-Chd-2022 (A.Y. 2017-18) - Anu Singhi, Sirhind 10 business income but it resulted in Long Term Capital gains. The relevant findings noticed read thus:- "21. In the totality of the above said facts and circumstances and the evidence perused by us, the nature of land being agricultural land stands established: a) as the said land was part of notified forest area where admittedly no other activities ITA No. 16 of 2012 4 except agricultural, if allowed. could be carried out; b) Girdawari of the landholdings of the assessee proves the stand of the assessee that it was agricultural land and also the notification issued for the urban usage/non-agricultural activities certifies that prior to its notification the said land was used for agricultural purposes. The land being registered in Land Revenue Records as Agricultural land, then there is no basis for holding the said land and as not agricultural land. We find support from the ratio laid down by the Chandigarh Bench of the Tribunal in DCIT v. A.P. Paper Mills Limited (supra). Accordingly, we hold that the nature of the land sold by the assessee as on the date of its sale was agricultural land, which was acquired by the assessee in the year 1995 and was sold during the year under consideration. 22. The said asset being held by the assessee cannot be said to be a business asset and its sale in small plots of land to different purchasers is not adventure in the nature of trade, in the absence of the assessee having floated the same or having developed its land for the purposes other than agricultural land. Further for converting the usage. prior permission is required from the authorities and in the absence of any permission being obtained by the assessee from PUDA authorities in respect of the land sold, merely because the land is sold in small plots to persons who intended its residential use, does not change the nature of land sold in the hands of the assessee and its taxability. We find support from the ratio laid down by the Hon'ble Patna High Court in the case of Addl.CIT v. Tarachand Jain, 123 ITR 567 (Pat), ITA No. 420-Chd-2022 (A.Y. 2017-18) - Anu Singhi, Sirhind 11 which has been referred to by the Chandigarh Bench of the Tribunal in DCIT v M/s A.P. Paper Mills Limited (supra). The relevant extract of the said judgment is as under:- ‘........the land may lie near an urban area and the land may have fetched a good price, may hold good in cases of agricultural land also. Since the land has been recorded in the official records as agricultural land, if the department wanted to show that the entry was wrong. it should have given ITA No.16 of 2012 5 concrete facts in that direction. For example, it could have shown that the land lay within the municipal limits of the town of Ranchi or that the assessee had made his entire plot of land into parcels and was selling each one of them for the purpose of constructing a house thereof. The fact that the purchaser has purchased it for the purpose of constructing his house has no relevance because to far at the seller is concerned, he will be deemed to have parted with the agricultural land in the form of agricultural land, unless it is prayed otherwise. The department has not brought up any such material on the record by which it could be said that the criteria adopted by the Tribunal for determining the character of the agricultural land was wrong. [Emphasis supplied) 23. In view thereof we hold that the gain arising on the sale of the aforesaid agricultural land cannot be taxed as income from business," 7. Learned counsel for the revenue was unable to show that the activity undertaken by the assessee was an adventure in the nature of trade. No error could be pointed out in the findings recorded by the CIT(A) and upheld by the Tribunal warranting interference by this Court." 7.3 In the instant case also, the impugned land has been recorded in the Revenue records as agricultural land. This fact is not in dispute. Just because the assessee had sold the land in piecemeal after entering into numerous ITA No. 420-Chd-2022 (A.Y. 2017-18) - Anu Singhi, Sirhind 12 transactions, it cannot be concluded that such transactions were in the nature of business and selling of immovable property. It is not in dispute that the assessee had duly filed the copies of the sale deed before the Assessing Officer and, therefore, it is a logical assumption that the Assessing Officer had duly examined these sale deeds before accepting the returned income of the assessee. Whether to accept the transactions as being taxable under the Long Term Capital Gain or to reject them and tax them under the head income from business would have been duly considered by the Assessing Officer at the time of assessment proceedings and the conclusion arrived at by the Assessing Officer was definitely one of the plausible views and, therefore, it cannot be said that the order passed by the Assessing Officer was erroneous inasmuch as being prejudicial to the interest of the Revenue. 7.4. Under similar circumstances, the Raipur Bench of this Tribunal in the cases of Shri Dilip Sangoi and Shri Arvind Sangoi (Supra), vide order dated 29.09.2021 had held as under: “8. We have carefully heard the rival submissions and perused the revisional order as well as the Assessment Order sought to be revised. The material/documents referred to and relied upon in the course of appeal has been perused in accordance with Rule 18(6) of the ITAT Rules, 1963. On perusal of the ITA No. 420-Chd-2022 (A.Y. 2017-18) - Anu Singhi, Sirhind 13 facts, it emerges that the assessee herein along with other co-owner sold a part of land parcel. It is the case of the assessee that, in past, he has never indulged into any business of real estate or sale or purchase of plots which fact has been duly placed before the A.O. in the course of assessment proceedings. No interest bearing funds have been utilized and no development expenses have been incurred. It is the claim of the assessee that the gain has arisen to the assessee due to efflux of time without any specific efforts and because of meteoric rise in value of land parcels arising to every land owners on account of unprecedented development of Raipur City. 8.1 When, we see the facts in its natural perspective, the characterisation of the income as 'capital gain' in the given facts, looks quite plausible. It cannot certainly be branded as an issue free of any debate. The law is well settled that where the A.O has taken a view which is plausible in law, cannot be displaced and substituted by the subjective view of a superior authority. In the instant case, the PCIT has not shown as to how the A.O. has gone wrong while admitting the nature of income declared by the assessee. There is nothing on record to show that the AO. acted arbitrarily in exercise of quasi judicial powers. The AO had merely adopted one of the courses permissible in law and backed by a long line of judicial precedents holding such income to be capital gains. In contrast, the PCIT has adopted erroneous measurement of land giving the impression of large parcel of land which is not true. The basic features of a capital asset were also overlooked. Secondly, it was open for the PCIT to examine the facts himself and come to a conclusion of un-debatable nature. We fail to understand what kind of enquiries is needed in such cases when the relevant facts are available on record both before the A.Q, as well as the PCIT and only warrants a relook at the same. 8.2 Explanation-2 to section 263 of the Act does not give a uncontrolled & unbridled power to the revisional Commissioner to reopen a completed assessment to conduct further enquiries to verify and find out whether order passed is in fact erroneous or not. The facts explained on behalf of the assessee gives an infallible impression that the course adopted ITA No. 420-Chd-2022 (A.Y. 2017-18) - Anu Singhi, Sirhind 14 by the assessee in treating the gains as capital gains chargeable under section 145 of the Act and endorsed by the A.O. to be plausible. 8.3 The revisional power exercised in the facts of the case is plainly without authority of law. Consequently, the revisional order passed under section 263 is liable to be quashed and set aside.” 7.5. Therefore, on an overall view of the facts and circumstances of the case and in view of the judicial precedents referred to by us in the preceding paragraphs, we are unable to concur with the view taken by the ld. PCIT and we quash the impugned order which has been passed u/s. 263 of the Act. 8.0 In the final result, appeal of the assessee stands allowed. (Order pronounced in the open Court on 06/06/2023) Sd/- Sd/- (VIKRAM SINGH YADAV) (SUDHANSHU SRIVASTAVA) Accountant Member Judicial Member Dated : 06.06.2023 Aks ITA No. 420-Chd-2022 (A.Y. 2017-18) - Anu Singhi, Sirhind 15 आदेशकȧĤǓतͧलͪपअĒेͪषत/ Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकरआय ु Èत/ CIT 4. आयकरआय ु Èत (अपील)/ The CIT(A) 5. ͪवभागीयĤǓतǓनͬध, आयकरअपीलȣयआͬधकरण, चÖडीगढ़/ DR, ITAT, CHANDIGARH 6. गाड[फाईल/ Guard File सहायकपंजीकार/ Assistant Registrar