Hanmantaram Murlidhar & Co, Raigad V. ITO wd 1 Panvel., Panvel

ITA 515/PUN/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0547 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-11-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 14-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR SHRI B C MALAKAR
• Keywords: Capital asset; Business income
• Section: 143(3); 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , A M . / ITA NO. 515 /PN/201 2 / ASSESSMENT YEAR : 20 0 6 - 07 HANMANTRAM MURLIDHAR & CO., C/O SHRI GIRISH J. KASAT, 756, TILAK ROAD, KAPAD BAZAR, PANVEL, DIST. RAIGAD 410206 . / APPELLANT PAN: A ADFH2812G VS. THE INCOME - TAX OFFICER , WARD - 1, PANVEL, RAIGAD . / RESPONDENT / APPELLANT BY : SHRI NI KHIL PATHAK / RESPONDENT BY : SHRI B.C. MALAKAR / RESPONDENT BY : SHRI B.C. MALAKAR / DATE OF HEARING : 0 5 . 1 1 .2015 / DATE OF PRONOUNCEMENT: 30 .1 2 .2015 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - I , THANE , DATED 1 3 . 12 .20 1 1 RELATING TO ASSESSMENT YEAR 20 0 6 - 07 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INC OME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.11,12,595/ - BY HOLDING THAT THE GAIN ON SALE OF AGRICULTURAL LANDS WAS TAXABLE AS BUSINESS INCOME OF THE APPELLANT AS AGAINST THE CLAIM OF THE APPELLANT THAT THE SAME WAS EXEMPT FROM TAX. ITA NO. 515 /PN/20 1 2 HANMANTRAM MURLIDHAR AND CO. 2 2] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE APPELLANT FIRM WAS ENGAGED IN THE BUSINESS OF TRADING IN LANDS AND ACCORDINGLY, THE GAIN OF RS.11,12,595/ - WAS TAXABLE AS BUSINESS INCOME OF THE APPELLANT. 3] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE LANDS SOLD IN THIS YEAR WERE CAPITAL ASSET OF THE FIRM AND SINCE THE SAID LANDS WERE AGRICULTURAL LANDS AND BEYOND 8 KMS FROM THE MUNICIPAL LIMITS, THE GAIN ARISING ON SALE OF LANDS WAS EXEMPT FROM TAX. 4] THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATE THAT - A . THE LANDS SOLD IN THIS YEAR WERE CAPITAL ASSETS OF THE APPELLANT FIRM AND SIMPLY BECAUSE, IT WAS ENGAGED IN THE BUSINESS OF LAND TRADING DID NOT IMPLY THAT IT COULD NOT HOLD CERTAIN LANDS AS CAPITAL ASSETS. B . A TRADER IN LAND COULD HOLD CERTAIN LANDS AS AN INVESTMENTS AND HENCE, SINCE THE LANDS SOLD IN THIS YEAR WERE CAPITAL ASSETS, THE GAIN ARISING WAS NOT TAXABLE AS BUSINESS INCOME. C . THE LANDS SOLD BY THE ASSESSEE IN THIS YEAR WERE AGRICULTURAL LANDS AND THEREFORE, WERE NOT CAPITAL ASSETS WITHIN THE MEANING OF SECTION 2(14) AND THEREFORE, THE GAIN ON SALE OF THE LANDS WAS EXEMPT FROM TAX. 5] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 3. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST THE ADDITION OF RS. 11,12,595/ - MADE BY THE AUTHORITIES BELOW HOLDING THAT THE GA IN ON SALE OF AGRICULTURAL LANDS WAS TAXABLE AS BUSINESS INCOME AS THE ASSE SSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN LAND. THE PLEA OF THE ASSESSEE IN THIS REGARD WAS THAT THE SAID LANDS WERE AGRICULTURAL LANDS AND SITUATED BEYOND 8 KILOMETERS FROM THE MUNICIPAL LIMITS AND HENCE, THE GAIN ARISING ON SALE OF LANDS WAS EXEMPT FOR TAX, WAS REJECTED. 4. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD SOLD AGRICULTURAL LANDS AT VILLAGE CHAWANE AND SHEDUNG AND THE PARTICULARS OF THE SAME ARE INCORPORATED AT PAGE 1 OF THE ASSESSMENT ORDER . THE ASSESSING OFFICER ON G OING THROUGH THE PARTNERSHIP DEED DULY ENCLOSED WITH THE RETURN OF INCOME, NOTED THAT THE BUSINESS ACTIVITY OF THE FIRM WAS TO DEAL IN LANDS AND IN VIEW THEREOF, TH E GAIN OFFERED AS CAPITAL GAIN SHOULD HAVE BEEN OFFERED AS BUSINESS INCOME. THE ASSESSEE FU RNISHED WRITTEN SUBMISSIONS TO THE SHOW ITA NO. 515 /PN/20 1 2 HANMANTRAM MURLIDHAR AND CO. 3 CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER IN THIS REGARD, WHICH IS INCORPORATED AT PAGES 2 TO 4 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PROFIT FROM SALE OF AGRICULTURAL LANDS WAS T O BE TAXE D AS BUSINESS INCOME AS THE PRINCIPAL BUSINESS OF THE ASSESSEE WAS TO SELL LAND. THE SAID LANDS WERE ACQUIRED WITH THE MOTIVE OF DEALING AND NOT FOR THE PURPOSE OF CULTIVATING. FURTHER, THE ASSESSEE HAD NOT SHOWN ANY AGRICULTURAL INCOME IN THE P AST YEAR S. E VER SINCE THE AGRICULTURAL LANDS WERE ACQUIRED, THE ASSESSEE HAD SHOWN THE AGRICULTURAL LANDS AS BUSINESS ASSETS IN ITS BALANCE SHEET. FURTHER, THE AGRICULTURAL LANDS WERE HELD IN THE NAME OF ONE OF THE PARTNERS AND THE PAYMENTS FOR THE SAME WERE MADE BY THE ASSESSEE FIRM. SINCE THE FIRM BEING NON - AGRICULTURIST, THERE WAS PREVENTION FROM PURCHASING THE AGRICULTURAL LANDS IN ITS OWN NAME AND IN SUCH CIRCUMSTANCES, THE INTENTION WAS TO EARN PROFIT AND NOT TO CARRY OUT AGRICULTURAL ACTIVITY. TH E PLEA OF THE ASSESSEE THAT THE AGRICULTURAL INCOME REMAINED TO BE ACCOUNTED FOR AS THE SAME WAS UTILIZED FOR PERSONAL CONSUMPTION OF THE PARTNERS WAS NOT ACCEPTED AS CORRECT AS THE PERSONAL CONSUMPTION OF THE PARTNERS WAS NOT ACCEPTED AS CORRECT AS THE INCOME DERIVED FROM THE LAND SHOULD HAVE BEEN ACCOUNTED FOR IN THE BOOKS O F ACCOUNT. ANOTHER ASPECT NOTED BY THE ASSESSING OFFICER WAS THAT INITIALLY THE ASSESSEE FIRM HAD MADE ADVANCE TAX PAYMENTS AND THEN CLAIMED TOTAL REFUNDS AND THERE WAS NO OTHER SUBSTANTIAL INCOME OTHER THAN THE TRANSFER OF LANDS, WHICH WARRANTED PAYMENT OF ADVANCE TAX. FURTHER, IF THE INCOME WAS CONSIDERED AS BUSINESS INCOME IN RESPECT OF TRANSFER OF LANDS, SECTION 2(14) OF THE ACT WAS NOT APPLICABLE TO THE CASE . THE ASSESSING OFFICER THUS, COMP UTED THE BUSINESS PROFIT FROM THE TWO TRANSACTIONS OF SALE ON LAND AS BUSINESS PROFITS TOTALING RS. 11,12,654/ - . THE OTHER ADDITIONS WERE MADE IN THE HANDS OF ASSESSEE AND SINCE THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ONLY WITH REGARD TO THE ADDITION OF RS. 11,12,595/ - , WE ARE NOT ADDRESSING THE SAME. ITA NO. 515 /PN/20 1 2 HANMANTRAM MURLIDHAR AND CO. 4 5. THE CIT(A) FROM THE PARTNERSHIP DEED DATED 01.10.2003 NOTED THAT THE PRINCIPAL BUSINESS OF THE FIRM HAD BEEN AND SHALL CONTINUE TO BE DEALING IN LANDS, DEVELOPMENT OF LAND S , CONDUCTING BUSINESS OF MANUFACTURING RICE, ETC. THE SAID DEED OF PARTNERSHIP WAS FILED BY THE ASSESSEE ALONG WITH SUBMISSIONS DATED 01.12.2011 AND FURTHER, COPIES OF BALANCE SHEET FILED FOR ASSESSMENT YEARS 2003 - 04 TO 2006 - 07 WERE PERUSED BY THE CIT(A) AND THEY REVEALED THAT THE LANDS WERE SHOWN IN THE BALANCE SHEET UNDER THE HEAD LIS T OF SUNDRY DEBTORS RELATED WITH LAND TRANSACTIONS SCHEME VII. THE DETAILS OF LANDS AS SHOW N IN THE SCHEDULE ARE TABULATED AT PARA 4 AT PAGES 9 AND 10 OF THE APPELLATE ORDER. SIMILARLY, THE SAID LANDS WERE SHOWN IN THE ASSESSMENT YEAR UNDER CONSIDERAT ION. SOME OF THE LANDS WERE SOLD BY THE ASSESSEE RESULTING IN PROFIT UNDER DISPUTE, THE CIT(A) FROM THE SAID EVIDENCE HELD THAT IT CLEARLY ESTABLISHED THAT THE ASSESSEE WAS CARRYING ON THE BUSINESS OF DEALING IN LANDS. LARGE NUMBER OF TRANSACTIONS REFLEC T ED IN THE LIST OF SUNDRY DEBTORS ALSO PROVED THAT THE LANDS PURCHASED BY THE ASSESSEE WERE STOCK - IN - TRADE. IT WAS ALSO THAT THE LANDS PURCHASED BY THE ASSESSEE WERE STOCK - IN - TRADE. IT WAS ALSO NOTED BY THE CIT(A) THAT THE ASSESSEE HAD NEVER CARRIED OUT ANY AGRICULTURAL ACTIVITY ON THE SAID LANDS AND NO AGRICULTURAL INCOME WAS SHOWN BY THE ASSESSEE. SINCE THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF LANDS, THE VARIOUS DECISIONS RELIED UPON BY THE ASSESSEE WERE HELD TO BE DISTINGUISHABLE ON FACTS AND SINCE THE ASSESSEE WAS CARRYING ON THE PURCHASE AND SALE OF LANDS, THE PROFITS ON SALE OF LANDS AT RS. 11,12,654/ - WAS HELD TO BE BUSINESS INCOME. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE RELIED ON THE SUBMISSIONS MADE BEFORE THE CIT(A), WHICH ARE INCORPORATED IN THE ORDER OF ITA NO. 515 /PN/20 1 2 HANMANTRAM MURLIDHAR AND CO. 5 CIT(A) ITSELF. IT WAS POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE LAND HOLDING WAS SOLD BY THE ASSESSEE AND THE SAME SHOULD BE ASSESSED UNDER THE HEAD CAPITAL GAINS. 8. THE LEAR NED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT IN 7/12 EXTRACT, THERE IS NO EVIDENCE OF ANY AGRICULTURAL ACTIVITY CARRIED ON BY THE ASSESSEE. FURTHER, THE ASSESSEE WAS A PARTNERSHIP FIRM AND ITS BUSINESS WAS TO DEAL IN LANDS. THE ASSESS ING OFFICER AND CIT(A) HAVE TREATED THE SAME TO BE BUSINESS INCOME IN VIEW OF THE FACTS AND IN VIEW OF DECLARING THE SAME AS ASSETS IN THE HANDS OF THE ASSESSEE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS A PARTNERSHIP FIRM AND THE MAIN ACTIVITY IN WHICH THE ASSESSEE IS ENGAGED IS IN DEALING THE LANDS. THE FACTUAL FINDING OF THE CIT(A) IN THIS REGARD IS THAT THE ASSESSEE HAD OWNED VARIOUS LANDS, WHICH HAVE BEEN DECLARED IN THE IS THAT THE ASSESSEE HAD OWNED VARIOUS LANDS, WHICH HAVE BEEN DECLARED IN THE BALANCE SHEET UNDER THE LIST OF SUNDRY DE BTORS RELATED WITH LAND TRANSACTIONS SCHEME VII STARTING FROM ASSESSMENT YEAR 2003 - 04 AND THEN IN ASSESSMENT YEAR 2004 - 05. DURING THE YEAR UNDER CONSIDERATION, THERE IS CERTAIN MOVEMENT IN THE LANDS AND TWO OF THE LANDS HAVE BEEN SOLD BY THE ASSESSEE . IN VIEW OF THE LARGE NUMBER OF TRANSACTIONS CARRIED OUT BY THE ASSESSEE IN LANDS REFLECT THE NATURE OF ASSESSEE TO CARRY ON THE BUSINESS OF SALE AND PURCHASE OF LANDS, WHERE THE LANDS PURCHASED BY IT WERE SHOWN AS STOCK - IN - TRADE. THE NATURE OF THE LAND S PURCHASED BY THE ASSESSEE IS CLAIMED TO BE AGRICULTURAL LANDS. HOWEVER, NO IOTA OF EVIDENCE HAS BEEN FILED BY THE ASSESSEE TO ESTABLISH THAT ANY AGRICULTURAL ACTIVITY WAS CARRIED ON THE AFORESAID LANDS. FURTHER, EVEN 7/12 EXTRACT FILED BY THE ASSESSEE REFLECTS NO AGRICULTURAL ACTIVITY. IN VIEW OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WHERE THE ASSESSEE IS ADMITTEDLY ITA NO. 515 /PN/20 1 2 HANMANTRAM MURLIDHAR AND CO. 6 ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF LANDS AND IN VIEW OF THE ASSESSEE HAVING DECLARED THE SAID LANDS AS PART OF ITS CURRENT ASSETS, WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE IN THIS REGARD AND DISMISSING THE SAME, WE UPHOLD THE ORDERS OF AUTHORITIES BELOW IN TREATING THE PROFIT ON SALE OF LAND AS BUSINESS INCOME IN THE HANDS OF THE ASSESSEE. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, DISMISSED. 10 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THIS 30 TH DAY OF DECEM BER , 2015. SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 30 TH DECEM BER , 2015 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE A PPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - I , THANE ; 4. / THE CIT - II , THANE ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE