Raghu Nath Arora, Kashipur V. JCIT, Kashipur

ITA 5494/DEL/2013

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1809 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 30-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 08-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Business income

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5494/DEL/2013 (ASSESSMENT YEAR: 2010 - 11 ) RAGHU NATH ARORA, NAVEEN MANDI SITHAL, KASHIPUR PAN: ACMPA1581E VS. JCIT, KASHIPUR UTTARAKHAND (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPATH, ADV SHRI V. RAJA KUMAR, ADV REVENUE BY: SHRI SURENDER PAL, SR. DR DATE OF HEARING 28/08 / 2018 DATE OF PRONOUNCEMENT 2 2 / 1 1 / 2018 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT ( A) - II, NEW DELHI DATED 22.08.2013 FOR THE ASSESSMENT YEAR 2010 - 11. 2. THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS OF APPEAL: - 1. CONFIRMING THE FINDINGS OF THE ASSESSING OFFICER THAT THE TRANSACTIONS IN SALE OF LAND AT LAXIPUR PATTI AND JAITPUR GHOSHI CONSTITUTED AN ADVENTURE IN THE NATURE 2. CONFIRMING THE ASSESSMENT OF AGRICULTURAL INCOME OF RS. 44,135/ - AS INCOME FROM OTHER SOURCES AS PROPOSED BY THE ASSESSING OFFICER. 3. CONFIRMING THE ADDITION OF RS. 1,79,650/ - AN ALLEGED LOW HOUSEHOLD WITHDRAWALS. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF GRAIN TR ADING AND COMMISSION AGENT. ASSESSEE FILED HIS RETURN OF INCOME ON 30/9/2010 DECLARING INCOME OF RS 909445/ . ASSESSMENT UNDER SECTION 143 (3) OF THE ACT WAS PASSED ON 26/3/2013 DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS. 2224470/ . IN THE ASSESSME NT PROCEEDINGS THE AO TREATED THE INCOME FROM BUSINESS OF TRADING IN LAND OF 1 091240 PAGE | 2 WHICH WERE SHOWN BY THE ASSESSEE AS LONG - TERM AND SHORT - TERM CAPITAL GAIN. FURTHER, AN ADDITION OF RS. 44135 WAS ALSO MADE AS ACCORDING TO HIM ASSESSEE FAILED TO SUBS TANTIATE AGRICULTURAL INCOME AND MATERIAL HAS BEEN ESTABLISHED AND PLACED ON RECORD THAT AGRICULTURAL INCOME COULD NOT ARISE FROM INDUSTRIAL LAND AND FROM LANDS NOT HELD FOR CROP SEASONS. FURTHER ADDITION OF 1 79650 WAS MADE BECAUSE OF LOWER HOUSEHOLD WITHDRAWAL. 4. ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX APPEALS WHO UPHELD ALL THE ADDITIONS EXCEPT SCALED DOWN ADDITION OF HOUSEHOLD BY RS 70,000/ - . HENCE, ASSESSEE HAS PREFERRED APPEAL BEFORE US. 5. ASSESSEE AGGRIEVED WITH THE ORDER HAS CHALLENGED ALL THE ABOVE THREE ADDITIONS CONFIRMED BY THE LEARNED CIT(A) . 6. THE FIRST ISSUE IS CHARGEABILITY OF PROFIT ON SALE OF LAND AT LAXMIPUR PATTI AND JAITPUR GHOSHI. THE BRIEF FACTS OF THE TRANSACTION ARE THAT DURING THE YEAR ASSESSEE HAS SHO WN LONG - TERM CAPITAL GAIN OF 1507934 FOR THE INSTANT YEAR ON SALE OF LAND. THE LEARNED ASSESSING OFFICER NOTED THAT LAND WAS PURCHASED AND SOLD DURING THE INSTANT YEAR AS ADVANCES HAVE BEEN GIVEN FOR PURCHASE OF LAND AND STAMP PAPERS HAVE BEEN PURCHASED IN ADVANCE FOR PURCHASE OF LAND. THEREFORE THE LEARNED AO HELD THAT ASSESSEE IS NOT AN INVESTOR PURCHASING ONE OR TWO PIECES OF LAND FOR THE PURPOSE OF GETTING BENEFITS BY WAY OF APPRECIATION OF VALUE OF LAND BUT HE IS SYSTEMATICALLY BUYING AND SELLING L AND BOTH AGRICULTURAL AND NONAGRICULTURAL LAND FOR THE PURPOSE OF MAKING PROFIT IN PURCHASE AND SALE. THEREFORE, ACCORDING TO HIM, THE ASSESSEE IS A TRADER IN LAND. HE FURTHER NOTED THAT THAT LAND PURCHASED BY THE ASSESSEE WAS SOLD DURING THE YEAR AND T HAT TOO AFTER MAKING PLOTS. ONE PLOT OF LAND PURCHASED DURING THIS YEAR HAS BEEN SOLD IN THE YEAR ITSELF . THE AO FURTHER NOTED THAT THE LAND DETAILS FOR FOUR YEARS CLEARLY PAGE | 3 SHOWS THAT THE ASSESSEE DOES NOT HOLD LAND AS INVESTMENT. HE FURTHER NOTED THAT ASSESSEE IS A COMMISSION AGENT AND TRADER IN GRAINS AND THEREFORE HE IS NEITHER AN AGRICULTURIST AND DOES NOT INTEND TO DO AGRICULTURAL ACTIVITIES ON AGRICULTURAL LAND PURCHASED AND THEREFORE ASSESSEE IS ENGAGED IN SYSTEMATIC PURCHASE AND SALE OF LAND. HE FURTHER NOTED THAT THE LAND IS NOT HELD FOR A LONG TIME. ONE OF THE PIECE OF LAND HAS BEEN PURCHASED AND SOLD DURING THE INSTANT YEAR ITSELF. FURTHER, THE LAND IS PURCHASED IN BIG PARCEL AND SOLD IN PIECES. HE FURTHER RECORDED THAT THE FREQUENCY AND MULTIPLICITY OF THE TRANSACTIONS ALSO SHOWS THAT ASSESSEE IS ENGAGED IN PURCHASE AND SALE OF LAND AS A TRADER. THE LEARNED CIT A HAS HELD THAT INVESTMENT M ADE IN PROPERTY IS SUBSTANTIAL AND APPEARS FAR MORE THAN WHAT IS INVESTED IN THE ADMITTED BUSINESS OF GRAIN TRADING IN COMMISSION AGENT. HE FURTHER NOTED THAT THE INTENTION OF THE ASSESSEE IS CLEARLY OF REAPING PROFITS FROM STRATEGIC INVESTMENT IN LAND AND THERE IS NO EVIDENT INTENTION OF USING ANY OF THE LAND FOR THE ADMITTED BUSINESS OR EVEN PERSONAL USE. HE FURTHER HELD THAT NOT ONLY THE LAND IS HELD FOR LONG DURATION BUT IT IS ALSO SOLD AT AN OPPORTUNE MOMENT AND THEREFORE ASSESSEE IS ENGAGED IN THE SAL E AND PURCHASE IN A SYSTEMATIC MANNER. HE THEREFORE UPHELD THE ORDER OF THE ASSESSING OFFICER. THE FACTS EMERGING ON THE RECORD IS THAT ASSESSEE HAS PURCHASED ONE PLOT OF LAND DURING THE YEAR AND SOLD TWO PLOTS OF LAND. IN ONE PLOT OF LAND THE ASSESSEE EARNED PROFIT OF 5.32 LAKHS WHERE THE SALE VALUE WAS 22.50 LAKHS, THE COST WAS 17.18 LAKHS, AND PLOT WAS HELD FOR MORE THAN 3 YEARS. IN ANOTHER PLOT OF LAND THE SALE VALUE WAS 27 LAKHS, COST WAS 21.40 LAKHS, AND THE RESULTANT PROFIT WAS 5.60 LAKHS IT W AS PURCHASED AND SOLD IN THE SAME YEAR. EVEN OTHERWISE THE SECOND PLOT OF LAND WERE SHOWN BY THE ASSESSEE AS SHORT TERM CAPITAL GAIN AND THE AO HAS STATED IT AS A BUSINESS INCOME, THERE PAGE | 4 IS NO DIFFERENCE IN TAXATION OF SAME. THEREFORE, THE WHOLE CONTROVE RSY IS ON THE SALE OF FIRST PLOT OF LAND, WHICH WAS PURCHASED IN 2007 AND SOLD IN 2010 AFTER HOLDING FOR THREE YEARS. THE LEARNED ASSESSING OFFICER HAS HELD THAT THERE WAS NO INTENTION OF THE ASSESSEE TO HOLD AS AN INVESTOR BUT AS A TRADER BUT THERE WAS N O MATERIAL PUT BY THE LEARNED AO TO SUBSTANTIATE HIS FINDING THE LEARNED CIT APPEAL UPHELD THE ADDITION ON THE ISSUE OF SUBSTANTIAL INVESTMENT AND INTENTION OF THE ASSESSEE. BOTH THESE CRITERIA AS ARE NOT RELEVANT FOR DECIDING UNLESS SUBSTANTIATED BY THE EVIDENCE. EVEN OTHERWISE, THE SUBSTANTIAL INVESTMENT CANNOT DISTINGUISH A PARTICULAR PURCHASE OF LAND BETWEEN A TRADER AND INVESTOR. MERELY BECAUSE THE ASSESSEE HAS ENTERED INTO FEW TRANSACTIONS OF PURCHASE AND SALE OF PLOT OF LAND IN PAST, DURING THE YEAR IT CANNOT BE SAID THAT ASSESSEE HAS SOLD THE PROPERTY IS A TRADER. IT WAS STATED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ASSESSEE ACQUIRED THE LAND OUT OF ITS OWN FUND , THE AGRICULTURAL INCOME WAS ALSO SHOWN ON THAT AGRICULTURAL PLOT OF LAND, D ISCLOSED AS INVESTMENT IN BOOKS OF ACCOUNTS AND NOT STOCK IN TRADE, AND THEREFORE ALL THESE FACTORS GO TO SHOW THAT THE ASSESSEE IS AN INVESTOR. THESE FACTS HAVE NOT BEEN DENIED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. BECAUSE OF THE ABOVE REASONS AND FACTS PLACED ON RECORD , WE ARE OF THE VIEW THAT WHEN ASSESSEE HELD LAND FOR MORE THAN THREE YEARS WITHOUT BORROWING FUNDS AND CLASSIFIED THE SAME IN ITS BOOKS OF ACCOUNTS , IT CANNOT BE SAID THAT ASSESSEE IS NOT AN INVESTOR. IT IS IMMATERIAL THAT THE HISTORY OF THE ASSESSEE SHOWS THE VARIOUS TRANSACTIONS OF THE PURCHASE AND SALE OF LAND, IT MAY BE THE ISSUE IN THAT PARTICULAR YEAR. ACCORDINGLY, WE REVERSE THE FINDING OF THE LOWER AUTHORITIES AND DIRECT THE LEARNED AO TO TREAT THE PROFIT SHOWN BY THE A SSESSEE OF LAXMIPUR PATTI LAND OF 5.32 LAKHS AS LONG - TERM CAPITAL GAIN AND JAITPUR GHOSHI LAND PROFIT OF PAGE | 5 5.60 LAKHS AS SHORT - TERM CAPITAL GAIN. IN VIEW OF THIS GROUND NUMBER ONE OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. GROUND NUMBER TWO OF THE APPEA L OF THE ASSESSEE IS CONFIRMATION OF THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER OF RS. 44135 AS INCOME FROM OTHER SOURCES INSTEAD OF AGRICULTURAL INCOME. ASSESSEE CLAIMED THAT ON THE LAND PURCHASED BY THE ASSESSEE AS AGRICULTURAL LAND ASSESSEE CAR RIED OUT AGRICULTURAL ACTIVITIES AND OUT OF SUCH ACTIVITIES, HE EARNED AGRICULTURAL INCOME. FOR THE PROOF OF AGRICULTURAL INCOME THE ASSESSEE SUBMITTED MANDI SAMITI RECEIPTS FOR SALE OF PRODUCE. HOWEVER, ASSESSEE COULD NOT PRODUCE BEFORE THE LEARNED ASSES SING OFFICER BILLS FOR PURCHASE OF SEEDS AND FERTILIZERS OR ANY OTHER EVIDENCE. T HEREFORE, HIS CLAIM WAS REJECTED. THE LEARNED CIT APPEAL HAS ALSO CONFIRMED THE FINDING OF THE AO. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT IN EARLIER YEARS SIMILAR INCOME FROM AGRICULTURAL ACTIVITIES HAS BEEN ACCEPTED IN THE CASE OF THE ASSESSEE. FACTS SHOW THAT ASSESSEE IS HOLDING FOUR PIECES OF LAND ONE OF THEM WAS INDUSTRIAL AND FROM THREE OTHER LAND, ASSESSEE HAS SHOWN THE INCOME OF RS. 44145. EVEN FROM THE INDUSTRIAL LAND, THE ASSESSEE HAS SHOWN PROFIT OF 7 250 ON ACCOUNT OF AGRICULTURAL ACTIVITIES THE ASSESSEE DID NOT SHOW WHAT WAS THE PRODUCE HE GOT FROM THAT INDUSTRIAL LAND . WITH RESPECT TO THE OTHER THREE PLOTS OF LAND, THE ASSESSEE HAS SHOWN TO G ROW CROP OF PADDY AND WHEAT. HOWEVER, THE ASSESSEE DID NOT SHOW THAT HOW AGRICULTURAL INCOME HAS BEEN EARNED BY THE ASSESSEE WITHOUT PUTTING ANY EFFORT WHEN LEARNED ASSESSING OFFICER HAS SHOWN THAT THERE IS NO RELATION BETWEEN THE PERIOD D URING THE WH ICH THE EXPENDITURE IS DEBITED IN THE LEDGER AND THE CROP SEASON. THE RECEIPTS BY SAMITI ARE NOT THE PROOF OF AGRICULTURAL ACTIVITIES BUT IT MAY BE THE PROOF OF SELLING OF THE AGRICULTURAL PRODUCE. THE ASSESSEE DID NOT PAGE | 6 PRODUCE THE BILLS FOR PURCHASE OF S EEDS AND FERTILIZER. THE ASSESSEE HAS ALSO NOT GIVEN THE COPIES OF KISHAN BAHI, KHASRA KHATAUANI, AND BILLS AND VOUCHERS FOR AGRICULTURAL OPERATION. THE LEARNED ASSESSING OFFICER HAS ALSO SHOWN THAT ONE OF THE AGRICULTURAL PRODUCE SHOWN BY THE ASSESS EE IS LABOUR - INTENSIVE AND NO LABOUR EXPENDITURE IS SHOWN. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF THE LOWER AUTHORITIES IN TREATING THE INCOME OF RS. 44135 AS INCOME FROM OTHER SOURCES. ACCORDINGLY, GROUND NUMBER TWO OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 8. THE GROUND NUMBER THREE IS WITH RESPECT TO THE ADDITION OF 1 79650/ ON ACCOUNT OF ALLEGED LOW HOUSEHOLD WITHDRAWALS. THE ASSESSING OFFICER NOTED THAT ASSESSEES FAMILY IS CONSISTING OF FOUR PERSONS AND ASSESSEE HAS SHOWN THE TOTAL HOUSEHOLD EXPENDITURE OF 1.76 LAKHS . OUT OF WHICH THE SCHOOL FEES PAID FOR THE CHILDREN IS 8 9613 AND THEREFORE THE EXPENDITURE PER MONTH LEFT FOR THE HOUSEHOLD EXPENDITURE IS ONLY RS. 2417/ PER PERSON PER MONTH WHICH IS TOO LOW . THE LEARNED AO ASKED THE ASSESSEE TO SUBSTANTIATE HIS HOUSEHOLD EXPENDITURE.. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE , THE LEARNED AO NOTED THAT ASSESSEE IS A PERSON WITH THE NET WORTH OF 1.64 CRORES AND HE ESTIMATED THE AVERAGE ANNUAL HO USEHOLD EXPENDITURE AT 2.66 LAKHS BY GIVING WEIGHTAGE TO EACH NATURE OF EXPENDITURE . AS ASSESSEE HAS SHOWN THE HOUSEHOLD EXPENDITURE WITHDRAWAL OF 8 7000 AND THEREFORE THE ADDITION OF 1 79650 IS MADE. ON APPEAL BEFORE THE LEARNED COMMISSIONER APPE ALS HE DELETED THE ADDITION OF 70,000 FROM THE TOTAL ADDITION AND CONFIRMED THE ADDITION OF 1 09650/ . THE LEARNED AUTHORISED REPRESENTATIVES CLAIM IS THAT THE ADDITION HAS BEEN MADE ON THE ASSUMPTION BASIS WITHOUT RECORDING A FINDING OF HAVING EXPAND ED THE MONEY. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS PAGE | 7 AND FIND THAT THE ASSESSEE HAS SHOWN THE HOUSEHOLD EXPENDITURE AT A VERY LOW FIGURE COMPARED TO THE LIVING STANDARD SHOWN BY THE LEARNED ASSESSING OFFICER. THE ASSESSEE ALSO COULD NOT PRODUC E THAT HOW HE IS MANAGING IN SUCH A LOW EXPENDITURE FOR HOUSEHOLD. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER APPEALS IN DELETING THE ADDITION OF 70,000 AND RETAINING THE ADDITION OF 1 09650/ ON ACCOUNT OF LOW HO USEHOLD WITHDRAWAL. LOOK ING INTO THE FAMILY SIZE, THE STATUS OF THE ASSESSEE AND THE DETAILED ANALYSIS OF THE VARIOUS NATURE OF EXPENDITURE LIKELY TO BE INCURRED BY THE LEARNED ASSESSING OFFICER HAS SHOWN , AND IN ABSENCE OF ANY PLAUSIBLE EXPLANATION BY T HE ASSESSEE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED ASSESSING OFFICER. HE HAS MINUTELY CALCULATED THE EXPENDITURE ON CLOTHING, FESTIVAL, AND SOCIAL OBLIGATION, RELIGIOUS EXPENSES , ENTERTAINMENT EXPENSES AND MEDICAL AND ELECTRICITY EXPEN SES. IN VIEW OF THIS , THE ADDITION OF 1 09650 CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX APPEALS IS APPROPRIATE . ACCORDINGLY, GROUND NUMBER THREE OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 9. IN VIEW OF THIS APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 2 / 1 1 / 2018 . - S D / - - S D / - ( AMIT SHUKLA ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 2 / 11 / 2018 A K KEOTA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DRUITT ASSISTANT REGISTRAR PAGE | 8 IT AT , NEW DELHI