ACIT, CHITTORGARH V. Shri Iqbal Hussain, CHITTORGARH

ITA 440/JODH/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7841 (ITAT-JODHPUR)
• Duration Of Justice: 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 25-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHYAM SINGHVI
• Keywords: Capital receipt; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 440 /JODH/2014 (A.Y. 200 8 - 09 ) ACIT, CIRCLE, CHITTORGARH. VS. SHRI IQBAL HUSSAIN, S/O SHRI HIDAYAT KHAN, NAI ABADI, SAWA, DISTRICT CHITTORGARH. (APPELLANT) PAN NO. ABDPH 8748 J (RESPONDENT) ASSESSEE BY : SHRI SHYAM SINGHVI. DEPARTMENT BY : SHRI MAHESH KUMAR - D.R. DATE OF HEARING : 07 / 10 /201 4 . DATE OF PRONOUNCEMENT : 08 / 1 0/201 4 . O R D E R PER N.K. SAINI, A.M TH IS IS AN APPEAL BY THE D EPARTMENT AGAINST THE ORDER DATED 0 2/0 6 /201 4 OF L D . CIT(A), UDAIPUR . THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN: - 2 1. DELETING THE ADDITION OF RS. 63,94,000/ - BEING THE AMOUNT RECEIVED ON ACCOUNT OF LEASING OUT HIS LAND FOR COMMERCIAL USE AND BY NO MEANS IT CAN BE TREATED AS COMPE NSATION IN LIEU OF LOSS OF AGRICULTURAL INCOME DURING THE PERIOD OF LEASE. 2. OBSERVING THAT THE COMPENSATION AGREEMENT WAS SENT AT NAUGHT IN VIEW OF THE SALE AGREEMENT DATED 20/11/2008 IN SPITE OF THE FACT THAT AS ON END OF THE YEAR I.E. 31/03/2008, THE SO CALLED SALE AGREEMENT, DATED 20/11/2008 WAS NOT AT ALL IN EXISTENCE AND IGNORING THE LEASE AGREEMENT IN EXISTENCE IN A.Y. 2007 - 08 BY OVERRIDING IT WITH SALE AGREEMENT DONE ON FUTURE DATE (I.E. 20/11/2008), WHILE DECIDING THE TAXABILIT Y OF RECEIPT/INCOME FOR F.Y. 2007 - 08 RELEVANT TO A.Y. 2008 - 09 . THAT THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DELETE OR MODIFY ANY OR ALL, THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2 FACTS RELATING TO THE ISSUE S UNDER CONSIDERATION ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRANSPORTATION AND WAS REGULARLY ASSESSED TO TAX , H E WAS DECLARING HIS INCOME U/S. 44AE OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) . F OR THE YEAR UNDER CON SIDERATION , R EASSESSMENT PROCEEDINGS HAD BEEN INITIATED ON ACCOUNT OF RECEIPT OF RS. 63,94,000/ - SHOWN IN ITR - 4 TOWARDS LEASING OF HIS LAND AS PER AGREEMENT TITLED COMPENSATION AGREEMENT CLAIMED E XEMP T ED U/S. 10 OF THE ACT, IN COLUMN NO. 6 OF SCHEDULE E1 OF THE RETURN OF INCOME FILED . THE ASSESSING OFFICER, HOWEVER, MADE THE ADDITION OF RS. 63,94,000/ - FOR THE FOLLOWING REASONS : - A. THE SALE AGREEMENT DATED 20/11/2008 WAS JUST AN AFTERTHOUGHT MADE WITH AN INTENTION TO PROVE THAT THE RECEIPT FOR LEASING OF THE 3 LAND NOT TAXABLE. IT MAY BE REFERRED AT PAGE 6 - 7 OF THE ASSESSMENT ORDER. B. AS PER CLAUSE - 4 OF THE COMPENSATION AGREEMENT, MAIN PURPOSE S ARE USE OF L A ND BY PROGRESSIVE ENTERPRISES F O R MINING WHICH IS A COMMERCIAL VENTURE IN WHICH THIS CONCERN IS ALREADY ENGAGED . IT MAY BE REFERRED AT PAGE 8 - 9 OF THE ASSESSMENT ORDER. C. RS. 63,94,000/ - RECEIVED FOR LEASING OUT HIS LAND FOR COMMERCIAL USE IS A REVENUE RECEIPT AS THE PERSON PAYING THE RENT HAS CLAIMED THIS PAYMENT AS REVENUE EXPENDITURE . IT MAY BE REFERRED AT PAGE 9 - 13 OF THE ASSESSMENT ORDER. D. THE RELIANCE IS PLACED ON MCDOWELS JUDGMENT THAT TAX PLANNING MAY BE LEGITIMATE PROVIDED IT IS WITHIN THE FR AME WORK OF LAW. E. THE ACT OF LATER CANNOT AFFECT THE EARLIER NATURE OF RECEIPT AS ALSO ITS QUANTUM AS HELD IN 159 ITR 464 AND 307 ITR 89 . 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) , WHO DELETED THE ADDITION BY OBSERVING THAT THE SIMILAR ISSUE HAVING IDENTICAL FACTS HAS BEEN DECIDED BY THE ITAT IN FAVOUR OF THE ASSESSEE IN THE CASE OF SHRI SABIR KHAN VS. ITO, CHITTORGARH IN I.T.A.NO. 224/JU/2012 FOR THE A.Y. 2008 - 09 . NOW THE DEPARTMENT IS IN APPEAL. 4. LEARNED D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER DATED 22/03/2013 . 5. IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND FURTHER SUBMITTED THAT THE ISSUE UNDER CONSIDERATION IS COVERED IN FAVOUR OF THE 4 ASSESSEE VIDE ORDER DATED 16/01/2013 OF THE ITAT, JODHPUR BENCH IN THE CA SE OF SHRI SABIR KHAN VS. ITO, CHITTORGARH IN I.T.A.NO. 224/JU/2012 FOR THE A.Y. 2008 - 09, COPY OF THE SAID ORDER WAS FURNISHED. 6 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IT IS NOTICED THAT THE IDENTICAL ISSUE HAVING SIMILAR FACTS HAS ALREADY BEEN ADJU DI CATED BY THE ITAT IN THE CASE OF SHRI SABIR KHAN VS. ITO, CHITTORGARH (SUPRA) . IN THE SAID CASE ALSO, THE AMOUNT WAS ALLEGED TO HAVE BEEN RECEIVED FROM ONE SHRI MOHD. SHER KHAN , PROP. OF M/S. PROGRESSIVE ENTERPRISES AS IN THE CASE OF THE ASSESSEE AND SIMILAR ADDITIONS WERE MADE IN THE SAID CASE OF SHRI SABIR KHAN VS. ITO, CHITTORGARH FOR A SUM OF RS. 85,77,000/ - . IN THE SAID CASE ALSO , SIMILAR AGREEMENT DATED 20/11/2008 W A S FOUND AS IN THE PRESENT CASE , SO THE FACTS OF THE INSTANT CASE ARE IDENTICAL TO THE FACTS INVOLVED IN THE CASE OF SHRI SABIR KHAN VS. ITO, CHITTORGARH WHEREIN SIMILAR ADDITION WAS DELETED IN I.T.A.NO. 224/JU/2012 FOR THE A.Y. 2008 - 09 BY OBSERVING IN PARA NO.8 & 9 OF THE ORDER DATED 16/01/2013 AS UNDER: - 8. AFTER CONSIDERING THE RIVAL STANDS, WE HAVE FOUND THAT THE ASSESSEE HAS CLAIMED THE RECEIPT OF RS. 85.77 LAKHS AS AGRICULTURAL LAND CAPITAL RECEIPT FROM SALE OF AGRICULTURAL LAND CO VERED U/S 2(14)(III) OF THE ACT IN VIEW OF THE SUBSEQUENT SALE THEREOF. INITIALLY, SHRI MOHD. SHER KHAN HAD PAID THIS 5 AMOUNT TO THE ASSESSEE UNDER AN AGREEMENT AS DISCUSSED ABOVE, IN LIEU OF AGRICULTURAL ACTIVITIES AND INCOME THEREFROM. SUBSEQUENTLY, THIS LAND WAS PURCHASED BY HIM AND ADJUSTED THIS AMOUNT TOWARDS SALE CONSIDERATION. WE ARE IN AGREEMENT WITH THE ID. C OUNSEL FOR THE ASSESSEE THAT THE SAID COMPENSATION AGREEMENT WAS SET AT NAUGHT IN VIEW OF SALE AGREEMENT DATED 20.11.2008, WHEN EARLIER COMPENSATION AGREEMENT WAS TREATED AS ADVANCE FOR THE SALE. IT IS CORRECT THAT THE LAND IS COVERED U/S 2(14)(I II) AS IT IS SITUATED OUTSIDE THE LIMITS OF MUNICIPAL AREA AND IS FULLY EXEMPT FROM TAX. THE ASSESSEE HAS AGRICULTURAL LAND CHOICE GIVEN THE CIRCUMSTANCES TO SELL ITS ASSETS EVEN AFTER ENTERING WI TH AN ALLEGED COMPENSATION AGREEMENT. THE TOTAL SALE CONSIDERATION HAS BEEN AGREED AT RS. 93.57 LAKHS, INCLUDING 85.77 LAKHS ALREADY RECEIVED . 9 . THE FINDING OF TH E A. O . THAT THE ASSESSEE HAS BEEN SHOWING AGRICULTURAL INCOME AND THE CUMULATIVE AGRICULTURAL INCOME COULD HAVE BEEN ABOUT 5 TO 7 LAKHS AS RETURNED BY THE ASSESSEE IN THE EARLIER YEARS WHILE ASSESSEE HAS RECEIVED 85.77 LAKHS FOR A PERIOD OF 5 YEARS, SO THIS AMOUNT CAN NOT BE TREATED AS COMPENSATION, IS DEFINITELY CORRECT, NOBODY WOULD GIVE SUCH AGRICULTURAL LAND HUGE AMOUNT FOR A PIECE OF LAND GIVING MEAGER AGRICULTURAL INCOME. THAT IS WHY THE PARTIES [INCLUDING THE ASSESSEE] HAVE AGREED FOR SALE OF THIS LAND FOR AGRICU LTURAL LAND TOTAL CONSIDERATION OF 93.57 LAKHS, FOR TOTAL AGRICULTURAL LAND MEASURING 31.19 BIGHAS. THE A.O. HAS NOT DISPUTED THE PRICE OF THIS LAND. RATHER, HE HAS DISPUTED THE COMPENSATION BY TREATING IT ON HIGHER SIDE. FOR WHATEVER PURPOSE THIS LAND WAS TAKEN BY SHRI MOHD. SHER KHAN AND WHATEVER NATURE OF THIS PAYMENT, HE MAY HAVE SHOWN IN HIS RETURN WOULD HARDLY BE OF ANY USE AGAINST THE INTEREST OF THE ASSESSEE IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE HAD DISCLOSED THIS AMOUNT OF RS. 85.77 LAKHS IN COLUMN 6 OF SCHEDULE E 1 AT PAGE NO. 20 OF HIS RETURN. IN FACT, THE ASSESSEE HAS AGREED FOR SALE OF THIS LAND AND THE PURCHASER BEING ON DICTATING POSITION, MAY BE DEALING WITH THIS ISSUE IN ANY MANNER SUITABLE TO HIS CAUSE. FOR THE ASSES SEE, HIS SUM RELATES ONLY TO THE SALE CONSIDERATION OF THIS LAND. THIS IS NOT AN AFTERTHOUGHT OF THE ASSESSEE BUT A PRE - THOUGHT OF SHRI SHER KHAN, IN FACT, THIS AMOUNT IS AN ADVANCE TOWARDS THE SALE CONSIDERATION. VERILY, THE AGREEMENT FOR SALE DATED 20.11.2008 HAS SUPERC E DED THE EARLIER AGREEMENT AND STAND CANCELLED. ALL THE CIRCUMSTANTIAL EVIDENCE PROVE THAT THE SALE AGREEMENT IS THE CORRECT INTENTION OF THE PARTIES, AND THE COMPENSATION AGREEMENT IS A CAMOUFLAGE AS CORRECTLY POINTED OUT BY THE A.O . THE 6 PAYMENT OF LEASING OUT THIS LAND FOR COMMERCIAL USE AND SALE PRICE OF LAND CANNOT BE EQUAL. RATHER, NO ONE WILL GIVE SUCH A HUGE COMPENSATION WHICH CANNOT BE A REAL THING AND HENCE, THIS AMOUNT IS AN ADVANCE TOWARDS SALE CONSIDERATION ONLY. THEREFORE , THIS AMOUNT CANNOT BE SUBJECTED TO TAX. ASSESSEE MAY NOT BE AWARE OF ALL SUCH NITTY GRITTIES OF LEGAL PROCEDURES AND HE HAS BEEN USED BY THE PURCHASERS ON THE ADVICE OF HIS LEGAL BRAINS, IN VIEW OF THE ABOVE DISCUSSION, IT IS PROVED THAT THE SALE AGREEME NT IS A CORRECT DOCUMENT, AND THE ASSESSEE HAD, IN FACT, SOLD THIS LAND. IT WAS OR IS UPTO THE PURCHASER WHEN HE WANTS TO GET I T REGISTERED. ACCORDINGLY, WE ORDER TO DELETE THIS ADDITION. 7 . SINCE THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS IN VOLVED IN THE CASE OF SHRI SABIR KHAN VS. ITO, CHITTORGARH IN I.T.A.NO. 224/JU/2012 FOR THE A.Y. 2008 - 09 , ORDER DATED 16/01/2013 AND THE LD. CIT(A) DELETED THE ADDITION ONLY ON THE BASIS OF THE SAID ORDER . SO, RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER , WE DO NOT SEE ANY MERIT IN THIS A PPEAL OF THE DEPARTMENT. 8 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED. ( ORDER PRONOUNCED IN THE COURT ON 08 TH OCTOBER , 201 4) . S D/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 08 TH OCTOBER , 201 4 . VR/ - 7 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY , ITAT, JODHPUR .