DCIT, Coimbatore V. C.K.Kannan, Coimbatore

ITA 579/CHNY/2013

• Counselvise Citation: 57921714 RSA 2013
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K RAGHU
• Keywords: Capital asset; Business income; Additional evidence
• Section: 143(3); 2(14)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , . . !' , # '$ % [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI S. S. GODARA, JUDICIAL MEMBER] ./ I.T.A.NO.579/MDS/2013 / ASSESSMENT YEAR : 2009-10 THE DY. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE I(3) COIMBATORE VS. SHRI C.K.KANNAN NO.31, SATHYAMOORTHY ROAD RAMNAGAR COIMBATORE 641 009 [PAN ATPPK 3351A ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI SHAJI P. JACOB, ADDL. CIT /RESPONDENT BY : SHRI K. RAGHU, CA / DATE OF HEARING : 17-02-2014 / DATE OF PRONOUNCEMENT : 19-02-2014 '* / O R D E R PER S.S.GODARA, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2009- 10, IS DIRECTED AGAINST THE ORDER OF THE COMMISSION ER OF INCOME-TAX (APPEALS)-I COIMBATORE, DATED 05.12.2012, PASSED IN APPEAL NO.266/ I.T.A.NO.579/13 :- 2 -: 11-12 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. AT THE OUTSET, THE APPELLANT/REVENUE POINTS OUT THA T THERE IS DELAY OF 26 DAYS IN FILING THE APPEAL. IN SUPPORT THEREOF, THERE IS AN AFFIDAVIT DATED 1.4.2013 OF THE ASSESSING OFFICER E XPLAINING THE REASONS OF DELAY. ACCORDINGLY, CONDONATION OF DEAY HAS BEE N PRAYED FOR. THE ASSESSEE HAS ALSO NOT DISPUTED THE SOLEMN AVERMENTS IN THE AFFIDAVIT. THUS, THE DELAY IN QUESTION OF 26 DAYS IN FILING TH E INSTANT APPEAL STANDS CONDONED. 3. ON MERITS, THE SOLE SUBSTANTIVE GRIEVANCE RAISED BY THE REVENUE IN THE GROUNDS IS THAT THE ASSESSING OFFICE R HAD RIGHTLY HELD THE PROFITS OF ` 2,92,60,911/- REALIZED BY THE ASSESSEE FROM SALE OF AGRICULTURAL LAND IN QUESTION AS BUSINESS INCOME; WHEREAS THE CIT(A) HAS WRONGLY DELETED THE SAME. THE REVENUE CONTENDS THAT BASED ON FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER HAD ASSESSED THE AFORESAID PROFITS AS ARISING FROM SALE OF THE LAND FROM ADVENTURE IN THE NATURE OF TRADE WHICH HAS BEEN WRO NGLY DISTURBED IN THE LOWER APPELLATE PROCEEDINGS. QUA THE REVENUE, THE CIT(A) OUGHT TO HAVE GIVEN OPPORTUNITY TO THE ASSESSING OFFICER BEFORE TAKING ON RECORD ADDITIONAL DETAILS FILED BY THE ASSESSEE. THEREAFTER, IT QUOTES I.T.A.NO.579/13 :- 3 -: CASE LAW OF [1994] 206 ITR 55(GUJ) HEMACHAND HIRAC HAND SHAH VS CIT AND [1987] 164 ITR 675 SMT. PARVATHI DEVI AND O THERS VS CIT AND PRAYS FOR ACCEPTANCE OF THE APPEAL. 4. THE ASSESSEE HAS CHOSEN TO DRAW SUPPORT FROM THE O RDER UNDER CHALLENGE PASSED BY THE CIT(A) HOLDING THAT T HE PROFITS IN QUESTION FROM SALE OF AGRICULTURAL LAND DOES NOT AMOUNT TO ANY BUSINESS INCOME AS THE LAND WAS AGRICULTURAL AND NOT A CAPITAL ASSET AS DEFINED U/S 2(14) OF THE ACT. IN SUPPORT, HE Q UOTES CASE LAW OF M.S. SRINIVASA NAICKER VS ITO [2007] 292 ITR 481(MA D) AND PRAYS FOR REJECTION OF THE APPEAL. 5. THE ASSESSEE, AN INDIVIDUAL, IS HAVING INCOME FR OM SALARY, BUSINESS AND OTHER SOURCES. ON 25.9.2009 HE HAD FI LED HIS RETURN DECLARING INCOME OF ` 17,75,630/- WHICH WAS SUMMARILY PROCESSED. 6. IN THE COURSE OF SCRUTINY , THE ASSESSING OFFICER NOTICED THE ASSESSEE TO BE THE MANAGING DIRECTOR OF A COMPANY M/S WINNERS INDIA CITY DEVELOPERS PVT. LTD., & PARTNER IN MANY FIRMS BY THE NAMES M/S SHIVALAYA PROMOTERS, M/S C.K KANNAN ASSOCIATES AND M/S SHIVALAYA PROMOTERS & DEVELOPERS, ALL ENGAGED IN RE AL ESTATE BUSINESS. HE CAME ACROSS A SUM OF ` 3,57,75,720/- REALIZED FROM SALE OF I.T.A.NO.579/13 :- 4 -: AGRICULTURAL LANDS. PER ASSESSING OFFICER, SINCE T HE ASSESSEE WAS IN REAL ESTATE BUSINESS THROUGHOUT, THIS AMOUNT HAD AL SO ARISEN FROM REAL ESTATE BUSINESS, LIABLE TO BE TREATED AS BUSINESS INCOME. 7. ON BEING PUT UP TO NOTICE, THE ASSESSEE CLARIFIED THAT HE HAD BEEN HAILING FROM AGRICULTURAL BACKGROUND AND PLEAD ED THAT TILL 2006, HE WAS CARRYING ON AGRICULTURAL ACTIVITIES AND EARN ED INCOME FROM COMMISSION FROM SALE OF COMMODITIES. THEREAFTER, H E STATED THAT IN JANUARY 2006, HE HAD PURCHASED LAND IN QUESTION MEA SURING 40.210 ACRES ALONGWITH ONE SHRI T.VARADHARAJ NEAR KINATHUK ADAVU, POLLACHI TALUK. THIS LAND WAS AGRICULTURAL IN NATURE, SITUA TED BEYOND A DISTANCE OF 8 KMS FROM A MUNICIPALITY OR CANTONMENT BOARD M AKING IT A CAPITAL ASSET U/S 2(14) OF THE ACT. THE ASSESSEE HAD ALS O EXPLAINED THAT HE CULTIVATED CROPS AS THE LAND WAS CULTIVABLE HAVIN G ELECTRIC CONNECTION AND OTHER IRRIGATION FACILITIES. FURTHER POSITIVE ASSERTIONS ON ASSESSEES PART WERE THAT SO FAR AS BUSINESS WAS CONCERNED, HE HAD BECOME MANAGING DIRECTOR IN THE AFORESAID CORPORATE ENTITY AND PARTNER IN THE ABOVE STATED FIRMS ONLY AFTER PURCHASING THIS PARCE L OF LAND. PER ASSESSEE, SINCE THE LAND WAS AGRICULTURAL, HE NEV ER INTENDED AND PUT TO USE THE SAME FOR ANY NON-AGRICULTURAL ACTIVITY. TO BUTTRESS THE SAME, THE ASSESSEE PLACED RELIANCE ON THE PRECEDI NG ASSESSMENT I.T.A.NO.579/13 :- 5 -: YEARS RETURNS WHEREIN HE HAD DECLARED AGRICULTURAL INCOME FROM TIME TO TIME. WE NOTICE FROM THE ASSESSMENT ORDER DATED 27.12.2011 THAT THE ASSESSING OFFICER DID NOT AGREE TO THE ASSESSE ES AFORESAID PLEAS. IN THE ASSESSMENT ORDER, HE ADMITTED THE FACTUAL PO SITION THAT THE LAND WAS AGRICULTURAL. HOWEVER, HE TOOK NOTICE OF THE FACT THAT THE SAME HAD BEEN SOLD TO ONE REAL ESTATE BUSINESS ENTITY WI THIN A SHORT SPAN OF TIME OF MORE THAN TWO YEARS. THEREAFTER, THE ASSES SING OFFICER TOOK INTO ACCOUNT BUSINESS BACKGROUND AND ASSESSEE S ASSOCIATION WITH THE CORPORATE ENTITIES AFORESAID TO HOLD THAT HE WA S ENGAGED IN BUSINESS FOR QUITE A LONG TIME. PER ASSESSING OFFI CER, EVEN A SINGLE TRANSACTION OF SUCH NATURE MAY AMOUNT TO ADVENTURE IN THE NATURE OF TRADE. FINALLY, HE CONCLUDED THAT THE ASSESSEE HA D PURCHASED THE LAND IN QUESTION WITH INTENTION TO RESELL FROM THE VERY BEGINNING AND THE TRANSACTION WAS A TRADING ADVENTURE AND LEAD PROFIT S DESERVED TO BE TREATED AS A BUSINESS INCOME. IN THIS MANNER, HE COMPUTED THE TOTAL PROFITS FROM THE SALE CONSIDERATION OF ` 3,57,75,720/- TO ` 2,92,60,911/- AND MADE ADDITION IN ASSESSEES INCO ME. 8. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL. IN PROC EEDINGS THEREIN, HE REITERATED THE SUBMISSIONS ALREADY MADE BEFORE THE ASSESSING OFFICER. THE SAME STAND ACCEPTED. A PER USAL OF THE FINDINGS I.T.A.NO.579/13 :- 6 -: IN THE LOWER APPELLATE ORDER REVEALS THAT THE LAND HAS BEEN HELD TO BE AGRICULTURAL HAVING ELECTRIC CONNECTION AS WELL A S IRRIGATION FACILITIES. IT HAS COME ON RECORD THAT THE PARCEL OF LAND IN QUEST ION IS BEYOND 8 KMS FROM ANY TOWN OR MUNICIPALITY FOR THE PURPOSE OF SE CTION 2(14) OF THE ACT. THE CIT(A) RECORDS A FINDING OF FACT THAT THE LAND WAS PURCHASED IN JANUARY 2006 WHEREAS THE ASSESSEE HAS JOINED TH E AFORESAID CORPORATE ENTITIES(SUPRA) AS MANAGING DIRECTOR AND PARTNER SUBSEQUENTLY I.E ON 5.5.2006 AND THEREAFTER. DRAWI NG INFERENCE, HE HOLDS THAT SINCE THE LAND HAD BEEN PURCHASED WELL B EFORE ASSESSEES JOINING THE CORPORATE BUSINESS, IT CANNOT BE PRESU MED THAT THE PROFITS ARISING FROM SALE OF LAND WOULD AMOUNT TO A BUSINE SS INCOME. THE CIT(A) HAS ELABORATELY DISCUSSED THAT THE ASSESSEE HAD BEEN CULTIVATING CROPS LIKE CORN, GROUND NUT ETC. IN THE LAND IN QUESTION AND ALSO OBSERVES THAT SALE PROCEEDS OF ASSESSEE S FAMILYS LAND SOLD IN THE YEAR 2005 WERE DEPOSITED IN HIS BANK ACCOUNT WHICH WERE SUBSEQUENTLY UTILIZED FOR PURCHASING THIS PARCEL OF LAND IN JANUARY 2006 ALONGWITH ONE SHRI T. VARADARAJ (SUPRA). SIMILAR LY, HE QUOTES RECITALS IN THE SALE DEED STATING THEREIN THAT THERE WERE ST ANDING CROPS AT THE TIME OF SALE OF LAND IN QUESTION. TAKING INTO CONSI DERATION THE TOTALITY OF ALL THESE CIRCUMSTANCES, THE ADDITION IN QUESTIO N STANDS DELETED. I.T.A.NO.579/13 :- 7 -: THEREFORE, THE REVENUE IS IN APPEAL. 9. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CAS E FILE. WE MAKE IT CLEAR THAT NO PAPER BOOK HAS BEEN FILED BY THE REVENUE SO AS TO CONTROVERT THE CIT(A)S FINDINGS THAT THE A SSESSEES SOURCE OF LAND PURCHASED IN THE YEAR 2006 WAS SALE OF FAMILY S LANDS, ITS NATURE AS AGRICULTURAL LAND, LOCATION BEYOND 8KMS FROM THE BOUNDARY OF NEARBY MUNICIPALITY OR CANTONMENT, CULTIVABILITY OF THE LAND, AGRICULTURAL OPERATIONS CARRIED ON BY THE ASSESSEE SINCE ITS PU RCHASE IN JANUARY 2006 TILL SALE IN JULY 2008, RECITALS IN THE SALE D EED THAT THERE WERE STANDING CROPS, ACT AND CONDUCT OF THE ASSESSEE TH ROUGHOUT DECLARING AGRICULTURAL INCOME AND THE FACT THAT IT WAS ONLY A FTER PURCHASING THE LAND THAT HE HAD BECOME MANAGING DIRECTOR AND PARTN ER IN THE CORPORATE ENTITIES STATED HEREINABOVE. THE REVENUE S ARGUMENTS BASED ON THE AFORESAID CASE LAW IS THAT SERIES OF L AND TRANSACTIONS LEAD TO A CONCLUSION THAT THE ASSESSEE IS IN REAL ESTAT E BUSINESS. IN OUR VIEW, THIS PLEA DOES NOT MERIT ACCEPTANCE. BEFORE THE HON'BLE ANDHRA PRADESH HIGH COURT, THE LAND SOLD WAS NOT AG RICULTURAL BUT ONLY SUITABLE FOR RAISING BUILDINGS. WE AGREE WITH THE SAME THAT IN CASE A PARCEL OF LAND COULD ONLY BE UTILIZED IN CONSTRUCTI ON, THE CONCERNED ASSESSEE CANNOT BE SAID TO HAVE CARRIED ON AGRICULT URAL ACTIVITIES. BUT I.T.A.NO.579/13 :- 8 -: THE LAND HERE TURNS OUT TO BE AGRICULTURAL ONLY. SIMILARLY, IN ANOTHER JUDICIAL PRECEDENT OF HON'BLE GUJARAT HIGH COURT(S UPRA), THE ASSESSEE THEREIN HAD TAKEN PART IN A SERIES OF LAND TRANSACT IONS WHEREAS IN THE PRESENT CASE, THE ASSESSEE HAD PURCHASED THE LAND IN JANUARY 2006 AND SOLD IN JULY 2008. SO, THE SERIES OF LAND TR ANSACTIONS IS MISSING IN THE INSTANT CASE. THUS, THIS CASE LAW IS ALSO D ISTINGUISHABLE. 10. NEXT ARGUMENT OF THE REVENUE THAT THE ASSESSEE HAD REALIZED HUGE PROFITS IN CRORES I.E HE PURCHASED TH E LAND IN 2006 FOR A SUM OF ` 20,89,241/- AND EARNED PROFITS OF ` 3,57,75,720/-. IN OUR CONSIDERED OPINION, IN THE ABSENCE OF ANY OTHER CLI NCHING FACTOR, MERELY BECAUSE THE ASSESSEE MAKES HUGE PROFITS FRO M SALE OF AGRICULTURAL LAND IPSO FACTO CANNOT BE A GROUND TO HOLD IT AS A TRADING ACTIVITY. 11. THERE IS ONE MORE ARGUMENT RAISED BY THE REVENUE I. E THE ASSESSEE HAD SOLD THE LAND TO VENDEE M/S ALNCO PROP ERTIES ALSO ENGAGED IN PROPERTY BUSINESS. THEREFORE IT SUBMITS THAT THE LAND HAD GOT HUGE POTENTIAL AND LIABLE TO BE TREATED AS A C APITAL ASSET OR A BUSINESS ACTIVITY. QUA THIS PLEA, WE FIND FORCE IN ASSESSEES CONTENTION BASED ON CASE LAW OF M.S.SRINIVASA NAICKER(SUPRA) W HEREIN IT HAS BEEN HELD THAT INTENTION OF A PURCHASER IS IRRELEVANT TO DETERMINE NATURE OF I.T.A.NO.579/13 :- 9 -: THE LAND SOLD IF THE VENDOR CARRIED ON AGRICULTURAL ACTIVITIES. THUS, THIS PLEA OF THE REVENUE ALSO FAILS. 12. THE LAST GROUND ABOUT ADDITIONAL EVIDENCE IN THE LO WER APPELLATE PROCEEDINGS HAS NOT BEEN SUPPORTED BY ANY MATERIAL ON RECORD. CONSEQUENTLY, THE FINDINGS OF THE CIT(A) ARE AFFIRMED. 13. THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 19 TH OF FEBRUARY, 2014, AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (S. S. GODARA) JUDICIAL MEMBER DATED: 19 TH FEBRUARY, 2014 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR