PURSHOTTAM BHATT, MUMBAI V. ITO WD 22(1)(4), NAVI MUMBAI

ITA 608/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2485 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 22-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C W ANGOLKAR
• Assessee Lawyers: JAYESH DADAI
• Keywords: Capital asset; Business expenditure; Income from undisclosed sources; Principle of natural justice; Earning of tax free income; Additional evidence
• Section: 143(3); 2(14); 142(1); 234B; 147; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) SHRI PURSHOTTAM BHATT FLAT NO.803, RUTU TOWER CHS, BLDG.NO.E-1, PATIL PADA, GHODBUNDER ROAD, THANE (WEST) 400607. V. INCOME TAX OFFICER WARD 22(1)(4), MUMBAI. VASHI, NAVI MUMBAI. PAN/GIR NO.: AAIPB9051A ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI JAYESH DADAI RESPONDENT BY : SHRI C.W. ANGOLKA R DATE OF HEARING : 28.10.2015 DATE OF PRONOUNCEMENT : 13.11.2015 O R D E R PER RAMIT KOCHAR,ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-19, MUMBAI (HEREINAFTER CALLED THE CIT(A)) DATED 17.12.2012 FOR THE ASSESSMENT YEAR 2007-08. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN MEMO OF APPEAL FILED ARE AS UNDER: (1) THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF ASSES SING OFFICER IN TAXING RS.18,28,128/- AS CAPITAL GAINS ON SALE OF AGRICULT URAL LAND. THE ACTION 2 I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) IS UNJUSTIFIED AND UNWARRANTED SINCE THE AGRICULTUR AL LAND IS NOT CAPITAL ASSET U/S.2(14) OF THE ACT. WITHOUT PREJUDICE, THE AMOUNT OF CAPITAL GAIN DETER MINED IS EXCESSIVE. (2) THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN NOT ADMITTING ADDITIONAL EVIDE NCES WHICH ARE RELEVANT FOR DECIDING THE ISSUE RAISED IN GROUND OF APPEAL NO.1. THE ACTION IS UNJUSTIFIED, UNWARRANTED AND AGAINST THE PRINCIPLE OF NATURAL JUSTICE. (3) WITHOUT PREJUDICE, THE COMMISSIONER OF INCOME TAX ( APPEALS) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIR MING THE ACTION OF ASSESSING OFFICER IN TREATING THE LOAN OF RS.5,00,0 00/- TAKEN FROM BROTHER AS SALE CONSIDERATION OF AGRICULTURAL LAND. THE ACTION IS UNJUSTIFIED AND UNWARRANTED AS THE LOAN CONFIRMATIO N OF BROTHER WAS FILED. (4) THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED I N LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF ASSES SING OFFICER IN NOT ALLOWING EXPENSES OF RS.32,305/- INCURRED FOR RENDE RING PROFESSIONAL SERVICES. THE ACTION IS UNJUSTIFIED AND UNWARRANTED. WITHOUT PREJUDICE, THE DISALLOWANCE IS EXCESSIVE. (5) THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF ASSES SING OFFICER IN TAXING RS.149,445/- AS UNDISCLOSED INCOME. THE ACTION IS U NJUSTIFIED AND UNWARRANTED PARTICULARLY YOUR PETITIONER HAS ALREAD Y DISCLOSED THE ABOVE INCOME IN HIS RETURN OF INCOME OF PROFESSIONA L FEES. THE INCOME HAS BEEN TAXED TWICE. (6) THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED I N LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF A SSESSING OFFICER IN LEVYING INTEREST U/S 234B AND 234C OF THE ACT. WITHOUT PREJUDICE, THE INTEREST LEVIED IS EXCESSIVE . 3 I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) (7) YOUR PETITIONER CRAVES LEAVE TO ADD, AMEND, ALTER AND / OR WITHDRAW THE AFORESAID GROUNDS OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS SOLD TWO IMMOVABLE PROPERTIES AT TEHSIL RAMNAGAR, DISTRICT NAINITAL IN UTTARANCHAL STATE DURING THE ASSESSMENT YEAR. AS PER THE REGISTERED SALE DOC UMENTS , THE PROPERTY IS WITHIN 4 KILOMETERS OF THE MUNICIPALITY AND WITHIN 250 METERS FROM THE HIGHWAY AND THE ASSESSEE HAS NOT OFFERED CAPITAL GA IN ARISING OUT OF THE SALE OF AFORE-STATED PROPERTIES FOR TAXATION AS THE PROPERT IES WERE CONSIDERED AS AGRICULTURAL PROPERTIES BY THE ASSESSEE AND GAIN AR ISING THEREOF WAS CLAIMED AS EXEMPT UNDER THE INCOME TAX ACT,1961. THE CASE W AS REOPENED AND NOTICE U/S.148 OF THE INCOME TAX ACT,1961(HEREINAFTER CALL ED THE ACT) WAS ISSUED ON 01.04.2009 AND SERVED ON THE ASSESSEE ON 08.04.2 009 AS IN VIEW OF THE AO, THE INCOME HAS ESCAPED ASSESSMENT. THE NOTICES U/S 143(2) AND 142(1) OF THE ACT WAS ALSO ISSUED TO THE ASSESSEE. 4. IN REPLY TO THE AFORESAID NOTICES, THE ASSESSEE SUBMITTED VIDE LETTER DATED 12.08.2009 AS UNDER:- AS PER SECTION 2(14)(III) POSTULATES ONLY TWO CON DITIONS NAMELY (I) THAT THE AGRICULTURAL LAND SHOULD BE IN AN AREAS WITHIN THE MUNICIPALITY AND (II) THE AREA SHOULD HAVE POPULATION OF MORE THAN 1 0,000/-. IN THIS CASE, BOTH THE CONDITIONS WERE ATTRACTED. HENCE CAPITAL G AIN ARISING ON TRANSFER OF AGRICULTURAL LANDS IN VILLAGE NAYAGAON CHAUHAN I S EXEMPT FROM CAPITAL GAIN TAX. 5. THE ASSESSING OFFICER (HEREINAFTER CALLED THE A O) OBSERVED THAT THE IMMOVABLE PROPERTIES ARE SITUATED WITHIN THE LIMITS OF 4 KM OF MUNICIPALITY AND THE ALPHABETICAL LIST OF TOWN OF UTTARANCHAL PO PULATION DETAILS SUBMITTED 4 I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) BY THE ASSESSEE ON 09-09-2009 SHOWS THAT THE POPULA TION OF RAMNAGAR MUNICIPALITY IS 46,205. THE AO HELD THAT AS PER EXP LANATION OFFERED BY THE ASSESSEE, IT IS CONFIRMED THAT THE LAND DOES NOT CO ME WITHIN THE PURVIEW OF SECTION 2(14) OF THE ACT AS AN AGRICULTURAL LAND AS THE LAND IS SITUATED WITHIN THE JURISDICTION OF 8 KMS OF MUNICIPALITY AND RAMNA GAR POPULATION IS MORE THAN 10000, THE LAND SOLD BY THE ASSESSEE IS NOT AN AGRICULTURAL LAND AND HENCE NOT EXEMPT FROM TAX UNDER THE ACT AND INCOME HAS ES CAPED ASSESSMENT. THE AO ALSO OBSERVED THAT WITH RESPECT TO ONE PROPE RTY SOLD ON 14.11.2006 TO SMT. KAUSHALYA DEVI ALIAS KUSUM BHATT W/O MR RAGHUV AR DAYAL WHO IS BROTHER OF THE ASSESSEE AND THE TOTAL COST OF THE P ROPERTY AS PER THE SALE DEED WAS 9,85,000/- AND WHILE A BANK DRAFT WAS ISSUED BY THE PURCHASER FOR RS.15,00,000/- WHICH WAS RECEIVED BY THE ASSESSEE AND CREDITED IN THE ASSESSEE BANK ACCOUNT, THE CLARIFICATION WAS SOUGH T BY AO FROM THE ASSESSEE TO EXPLAIN THE DIFFERENCE. THE ASSESSEE SUBMITTED T HAT RS.5,00,000/- IS LOAN RECEIVED FROM HIS BROTHER FOR WHICH LOAN CONFIRMATI ON WAS ALSO FILED BY THE ASSESSEE AND RS.15,000/- IS TOWARDS REIMBURSEMENT O F TRAVELLING AND OTHER INCIDENTAL EXPENSES WHILE THE BALANCE OF RS.9,85,00 0/- IS THE SALE CONSIDERATION OF THE PROPERTY SOLD BY THE ASSESSEE TO THE WIFE OF HIS BROTHER . THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE AND HELD THAT THE CONSIDERATION FOR THE SALE OF THE PROPERTY IS RS.15 ,00,000/- AS THE DEMAND DRAFT RECEIVED BY THE ASSESSEE AT THE TIME OF THE S ALE OF PROPERTY WAS OF RS.15,00,000/- AND THE SALE CONSIDERATION IS NOT RS .9,85,000/- AS REFLECTED IN REGISTERED SALE DEED AS THE AMOUNT OF LOAN RECEIVED OF RS.5,00,000/- IS NOT A GENUINE LOAN BUT THE PART OF SALE CONSIDERATION ON LY, THOUGH LOAN CONFIRMATION 5 I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) HAS BEEN FILED. THE AO DOUBTED THE GENUINENESS OF T HE LOAN AND HELD THAT THE ASSESSEE HAS SOLD THE LAND TO HIS BROTHER AND THERE APPEARS TO BE NO REASONS FOR RAISING ANY LOAN FROM THE SAME PERSON AT THAT T IME WITHOUT ANY PURPOSE AND ALSO THERE IN NO STIPULATION OF INTEREST ON THI S LOAN AND ACCORDINGLY AO BROUGHT TO TAX CAPITAL GAIN OF RS18,28,128/- TO TAX BY TREATING BOTH THE PROPERTIES SOLD AS NON-AGRICULTURAL PROPERTIES NOT ENTITLED FOR EXEMPTION FROM TAX UNDER THE ACT VIDE ASSESSMENT ORDERS DATED 24-0 9-2009 PASSED U/S 143(3) READ WITH SECTION 147 OF THE ACT AND ALSO IN CASE OF ONE PROPERTY BY TREATING SALE CONSIDERATION AS RS.15,00,000/- INSTE AD OF RS.9,85,000/- AS PER REGISTERED SALE AGREEMENT FOR REASONS ENUMERATED AB OVE. 6. THE AO ALSO DISALLOWED VIDE ASSESSMENT ORDERS DA TED 24-09-2009 PASSED U/S 143(3) READ WITH SECTION 147 OF THE ACT , THE EXPENSES OF RS.32,305 CLAIMED BY THE ASSESSEE AS EXPENDITURE RELATED TO T HE PROFESSION FOR WHICH NO EVIDENCE WAS PRODUCED BY THE ASSESSEE BEFORE THE AO AND ONLY SUBMISSION WAS MADE BY THE ASSESSEE THAT THESE EXPENSES ARE RE LATED TO HIS PROFESSION AND SHOULD BE ALLOWED AS BUSINESS EXPENSES. 7.THE AO ALSO TREATED AS INCOME FROM UNDISCLOSED SO URCES , THE PROFESSIONAL FEES OF RS.1,49,445/- RECEIVED BY ASSESSEE FOR WHIC H NO DETAILS WERE FURNISHED BY THE ASSESSEE REGARDING NATURE OF SERVICES RENDER ED AND WHEREBY THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE FEES OF R S.1,49,445/- IS NOT A PROFESSIONAL FEES RATHER IT IS AN AGRICULTURAL INCO ME FROM SALE OF FRUITS AND VEGETABLES WHICH WERE NOT SUPPORTED BY THE SALE BIL L AS THE AGRICULTURAL PRODUCTS WERE SOLD IN VILLAGE AREA AND BY MISTAKE T HE SAME WAS SHOWN AS 6 I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) PROFESSIONAL FEE INSTEAD OF AGRICULTURAL INCOME. TH E ASSESSING OFFICER TREATED THE INCOME OF 1,49,445/- AS INCOME FROM UNDISCLOSED SOURCES AND ADDED TO THE INCOME OF THE ASSESSEE VIDE ASSESSMENT ORDERS D ATED 24-09-2009 PASSED U/S 143(3) READ WITH SECTION 147 OF THE ACT. 8. AGGRIEVED BY THE ASSESSMENT ORDERS DATED 24-09-2 009 PASSED U/S 143(3) READ WITH SECTION 147 OF THE ACT BY THE AO , THE ASSESSEE FILED FIRST APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT BOTH TH E LAND SOLD WERE AGRICULTURAL LAND SITUATED BEYOND 8 KMS FROM MUNIC IPALITY AND CANTONMENT BOARD AND GAIN ARISING ON TRANSFER OF AGRICULTURAL LAND BEING EXEMPT INCOME IS NOT SUBJECT TO CAPITAL GAINS TAX. THE ASSESSEE SUBM ITTED THAT IN THE SALE DEED, WHAT IS MENTIONED IS MUNICIPAL BOARD AND NOT MUNICI PALITY. MUNICIPALITY BOARD IS QUITE DIFFERENT FROM MUNICIPALITY. THE ASS ESSEE SUBMITTED THAT THE CALCULATION OF LONG TERM CAPITAL GAIN IS INCORRECT. THE A.O. HAS TAKEN WRONG FIGURE OF SALE CONSIDERATION. THE AO HAS TAKEN WRON G FIGURE OF RS.19,70,500/- AS SALE CONSIDERATION WHICH INCLUDED RS..5,00,000/ -RECEIVED BY THE ASSESSEE AS LOAN FROM HIS BROTHER SHRI RAGHUBER DATTA BHATT AND RS.15,000/- ALSO FROM THE BROTHER, SHRI RAGHUBER DATTA BHATT TOWARD REIMB URSEMENT OF TRAVELLING EXPENSES. THE SALE CONSIDERATION IS OF RS.14,85,000 /- WHICH IS MENTIONED IN THE SALE AGREEMENT ITSELF. THEREFORE, EVEN FOR CALC ULATING THE CAPITAL GAIN, THE SAID CONSIDERATION SHOULD BE TAKEN AT RS.14,85,000/ -. THE ASSESSEE SUBMITTED TO HOLD THE SAID LAND AS AGRICULTURAL LAND SITUATED BEYOND 8 KM. OF THE MUNICIPALITY AND GAINS ARISING FROM SALE OF SAID LA ND TO BE HELD AS NOT LIABLE OF TAX. 7 I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) 9. DURING THE APPELLATE PROCEEDINGS BEFORE THE CIT (A), THE ASSESSEE SUBMITTED THE ADDITIONAL EVIDENCES IN THE FORM OF O NE AFFIDAVIT DATED 11.11.2011 OF THE ASSESSEE AND XEROX COPY OF THE R EPORT DATED 24.01.2011 OF THE DY. DISTRICT OFFICER ,NAINITAL WHICH WAS NOT PR ODUCED BEFORE THE AO. THE CIT(A) DID NOT ADMIT THE ADDITIONAL EVIDENCE AS IN THE OPINION OF THE CIT(A), THE ASSESSEE HAS NOT COMPLIED WITH THE REQUIREMENTS OF RULE 46A OF INCOME TAX RULES, 1962 AND THE ASSESSEE HAS NOT DEMONSTRA TED ANY SUFFICIENT CAUSE FOR NOT PRODUCING THESE EVIDENCES BEFORE THE AO. ON MERITS ALSO THE CIT(A) HELD THAT THE ADDITIONAL EVIDENCE NEED TO BE REJECT ED AS THE XEROX COPY OF THE LETTER OF DY. DISTRICT OFFICER IS FILED WHICH DOES NOT HAVE A LETTER NUMBER NOR IT BEARS THE OFFICE SEAL. FURTHER, THE SAID LETTER STA TES THAT THE RAMNAGAR DOES NOT HAVE NAGAR NIGAM I.E. MUNICIPAL CORPORATION OR ARMY CANTONMENT BOARD BUT IT DOES NOT SAY THAT RAM NAGAR DOES NOT HAVE A NAGA R PALIKA OR MUNICIPALITY. THE SALE DEED CLEARLY DEMONSTRATE THAT RAMNAGAR HAS NAGAR PALIKA . IT HAS POPULATION OF 47099 AS PER 2001 CENSUS AND THE SALE DEED ALSO SHOWS THAT THE LAND IS SITUATED WITHIN FOUR KILOMETERS OF NAGAR PA LIKA AND 250 METERS FROM HIGHWAY WHICH CLEARLY ESTABLISHES THAT IT IS WITHIN PURVIEW OF SECTION 2(14)(III)(A) OF THE ACT AND THE LAND IN QUESTION I S NOT AN AGRICULTURAL LAND. THE CIT(A) ALSO HELD THAT THE SALE DEED IS IN HINDI AND THE WORD USED IS NAGARPALIKA AND LITERAL TRANSACTION OF THE WHICH IS MUNICIPALITY . MUNICIPALITY INCLUDES MUNICIPAL COUNCIL, MUNICIPAL BOARD , MUNIC IPAL COMMITTEE. THE CIT(A) OBSERVED THAT AS PER CONSTITUTION OF INDIA , THERE ARE THREE TYPES OF URBAN LOCAL BODIES WHICH INCLUDES NAGAR NIGAM (MUNI CIPAL CORPORATION) , NAGAR PALIKA (MUNICIPALITY) AND NAGAR PANCHAYAT (CI TY COUNCIL) AND THERE IS NAGAR PALIKA IN RAMNAGAR AND THUS , AS PER PROVISIO NS OF SECTION 2(III)(A), THE 8 I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) ASSESSEES LAND IS SITUATED IN AN AREA WHICH IS WIT HIN THE 4 KM JURISDICTION OF MUNICIPALITY AND HAS A POPULATION OF MORE THAN 1000 0 AND HENCE THE LAND IN QUESTION IS OUTSIDE THE PURVIEW OF AGRICULTURE LAND . THUS, THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE ON THIS GROUND . SIMILARLY, WITH RESPECT OF THE LOAN OF RS.5,00,000/ - RAISED BY THE ASSESSEE FROM HIS BROTHER AND TREATED AS PART OF SALE CONSIDERATI ON OF THE PROPERTY SOLD BY THE ASSESSEE , BY THE AO, IT WAS SUBMITTED BY THE A SSESSEE THAT THE ASSESSEE WAS IN NEED OF FUNDS AND HE HAS RECEIVED INTEREST F REE LOAN FROM HIS BROTHER FOR WHICH THE LOAN CONFIRMATION WAS FILED ALONG WIT H PAN . THE CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE AND HELD THAT THE TH E ASSESSEE WAS NOT ABLE TO DISCHARGE THE ONUS CAST U/S.68 OF THE ACT AS THE AS SESSEE IS NOT ABLE TO PROVE THE CREDITWORTHINESS AND GENUINENESS OF THE LOAN TR ANSACTION . THE CIT(A) RELIED UPON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF P.MOHAN KALA & OTHERS IN 291 ITR 278 AND THE APPEAL OF THE ASSESSEE WAS ALSO DISMISSED BY THE CIT(A) ON THIS GROUND. SIMILARLY, THE CIT(A) DISALLOWED THE CLAIM OF ASSES SEE WITH RESPECT TO THE EXPENDITURE CLAIMED OF RS.32,305/- CLAIMED TO HAVE BEEN INCURRED FOR RENDERING PROFESSIONAL SERVICES BY THE ASSESSEE AS NO PROOF/EVIDENCES OF EXPENDITURE WAS SUBMITTED BY THE ASSESSEE WITH RES PECT TO THESE EXPENSES EXCEPT THE SUBMISSION OF THE ASSESSSEE THAT THESE E XPENSES ARE INCURRED ON CONVEYANCE, MOBILE CHARGES ETC RELATED TO THE BUSIN ESS . 9 I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) REGARDING THE RECEIPT OF RS.1,49,445/- BY THE ASSE SSEE BEING TREATED AS UN- DISCLOSED INCOME , THE ASSESSEE SUBMITTED BEFORE TH E CIT(A) THAT INCOME OF RS.1,49,445/ WAS CLEARLY SHOWN IN THE P&L A/C PRODU CED BEFORE THE AO AND OFFERED FOR TAXATION . THE ACTION OF THE AO IN TREA TING THE SAME AS INCOME FROM UNDISCLOSED SOURCES ALSO AND NOT REDUCING THE SAME AMOUNT FROM INCOME FROM PROFESSION HAS LED TO TAXING TWICE THE SAME IN COME WHICH IS NOT PERMISSIBLE UNDER THE ACT. THE CIT(A) HELD THAT NO EVIDENCE IS SUBMITTED BY THE ASSESSEE THAT THIS INCOME IS FROM AGRICULTURE A ND THE CIT(A) HELD THAT THE AO HAS RIGHTLY TREATED THE SAME AS INCOME FROM OTHE R SOURCES AND DIRECTED THE AO TO VERIFY THE CONTENTIONS AND CLAIM OF THE A SSESSEE THAT THIS INCOME IS TAXED TWICE AND IF THE CONTENTIONS/CLAIM OF THE ASS ESEE IS CORRECT , THE AO WAS DIRECTED TO GIVE RELIEF TO THE ASSESSEE AS THE SAME INCOME CANNOT BE TAXED TWICE. 10. AGGRIEVED BY THE APPELLATE ORDERS DATED 17 TH DECEMBER 2012 PASSED BY THE CIT(A) IN FIRST APPEAL FILED BY THE ASSESSEE , THE ASSESSEE HAS FILED SECOND APPEAL BEFORE US, THE ASSESSEE CONTENDED THAT HE HA S PRODUCED ADDITIONAL EVIDENCES BEFORE THE CIT(A) BEING REPORT DATED 24.0 1.2011 FROM DY. DISTRICT OFFICER , RAMNAGAR , NAINITAL CERTIFYING THAT THER E IS NO MUNICIPALITY OR CANTONMENT BOARD WITHIN TEHSIL RAMNAGAR, DISTRICT N AINITAL , UTTRANCHAL WHICH GOES TO THE ROOT OF THE MATTER AND THE AFFIDA VIT DATED 11.11.2011 OF THE ASSESSEE REGARDING THE LAND WHICH ARE SOLD BEING AN AGRICULTURAL LAND AS DEFINED U/S 2(14) OF THE ACT WHICH IS EXEMPT FROM C APITAL GAIN TAX AND THE CIT(A) HAS ERRED IN NOT ADMITTING AND REJECTING THE ADDITIONAL EVIDENCES AND HE MAY BE DIRECTED TO ADMIT AND CONSIDER THE SAME O N MERITS. THE ASSESSEE 10 I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) REITERATED ITS SUBMISSIONS AS MADE BEFORE THE AUTHO RITIES BELOW AND LD DR RELIED UPON THE ORDERS OF AUTHORITIES BELOW. WE HAVE OBSERVED FROM SALE DEED EXECUTED BY THE ASS ESSEE (PLACED IN PAPER BOOK AT PAGES 22-32 ON RECORD ) THAT THE LAND IS SI TUATED AT A DISTANCE OF AROUND 4 KMS FROM NAGARPALIKA. WE HAVE ALSO OBSERV ED AND EXTRACTED FROM WIKIPEDIA THE MEANING OF NAGARPALIKA AS UNDER : THAT IN INDIA , ANAGARATCHI NAGAR PALIKA OR MUNICIPALITY IS AN URBAN LOCAL BODY THAT ADMINISTERS A CITY OF POPULATION 100,000 OR MORE. HOWEVER, THERE ARE EXCEPTIONS TO THAT, AS PREVIOUSLY NAGAR PALIKAS WERE CONSTITUTED IN URBAN CENTERS WITH POPU LATION OVER 20,000, SO ALL THE URBAN BODIES WHICH WERE PREVIOUS LY CLASSIFIED AS NAGAR PALIKAS WERE RECLASSIFIED AS NAGAR PALIKAS EV EN IF THEIR POPULATION WAS UNDER 100,000. UNDER THEPANCHAYATI R AJ SYSTEM, IT INTERACTS DIRECTLY WITH THE STATE GOVERNMENT, THOUG H IT IS ADMINISTRATIVELY PART OF THE DISTRICT IT IS LOCATED IN. GENERALLY, SMALLER DISTRICT CITIES AND BIGGER TOWNS HAVE A NAG AR PALIKA. NAGAR PALIKAS ARE ALSO A FORM OF LOCAL SELF-GOVERNMENT EN TRUSTED WITH SOME DUTIES AND RESPONSIBILITIES, AS ENSHRINED IN T HE CONSTITUTIONAL (74TH AMENDMENT) ACT,1992 . THUS, NAGARPALIKA MEANS MUNICIPALITY AND NOW IF WE REFER TO THE SECTION 2(14) OF THE ACT AS APPLICABLE DURING THE ASSESSMEN T YEAR 2007-08 WHICH STIPULATED THAT AN AGRICULTURAL LAND IN INDIA IS NO T A CAPITAL ASSET BUT BECOMES A 11 I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) CAPITAL ASSET IF THE LAND IS LOCATED UNDER SECTION 2(14)(III)(A) AND (B) OF THE ACT. SECTION 2(14)(III)(A) OF THE ACT COVERS A SITUATION WHERE THE SUBJECT AGRICULTURAL LAND IS LOCATED WITHIN THE LIMITS OF M UNICIPALITY , MUNICIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOWN AREA COM MITTEE, TOWN COMMITTEE, OR CANTONMENT COMMITTEE OR BY ANY OTHER NAME AND WH ICH HAS A POPULATION OF NOT LESS THAN 10,000. SECTION 2(14)(III)(B) OF THE ACT COVERS THE SITUATION WHERE THE SUBJECT LAND IS NOT ONLY LOCATED WITHIN T HE DISTANCE OF 8 KMS., FROM THE LOCAL LIMITS, WHICH IS COVERED BY CLAUSE (A) TO SECTION 2(14)(III) OF THE ACT, BUT ALSO REQUIRES THE FULFILMENT OF THE CONDITION T HAT THE CENTRAL GOVERNMENT HAS ISSUED A NOTIFICATION UNDER THIS CLAUSE FOR THE PURPOSE OF INCLUDING THE AREA UPTO 8 KMS., FROM THE MUNICIPAL LIMITS, TO REN DER THE LAND AS A CAPITAL ASSET. IF WE NOW SEE THE CASE OF THE ASSESSEE WE FIND THAT THE LAND IS SITUATED AT A DISTANCE OF 4 KMS FROM THE NAGARPALIKA (MUNICIPALIT Y) AS PER SALE DEED (WHICH IS PLACED AT PAPER BOOK PAGE NO 22-32 ON RECORD) W HILE IT IS NOT CLEAR FROM THE SALE DEED AS TO WHICH NAGARPALIKA (MUNICIPALITY) IS REFERRED TO IN THE SALE DEED AS NO NAME OF NAGARPALIKA IS MENTIONED IN IT AND SECONDLY , THE ASSESSEE HAS PRODUCED AS AN ADDITIONAL EVIDENCE BEFORE THE C IT(A) A REPORT DATED 24.1.2011 FROM DY. DISTRICT OFFICER , RAMNAGAR, NAI NITAL ( WHICH IS AGAIN PLACED IN PAPER BOOK AT PAGE 13 ON RECORD )WHICH STATES TH AT THERE IS NO MUNICIPALITY OR CANTONMENT BOARD WITHIN THE TEHSIL RAMNAGAR, DIS TRICT NAINITAL . THESE ARE FACTUAL FINDINGS WHICH NEED VERIFICATION AND INVEST IGATION BY THE AUTHORITIES BELOW TO RESOLVE THE CONTROVERSY WHETHER THE LAND I N QUESTION IS AGRICULTURAL LAND OR NOT AS DEFINED UNDER THE ACT TO COMPUTE COR RECT INCOME AS PER THE ACT TO FASTEN CORRECT TAX LIABILITY ON THE ASSESSEE WHI CH IS THE MANDATE OF THE ACT 12 I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) AND SECTION 2(14) OF THE ACT CLEARLY DEFINES AS EXP LAINED BY US ALSO IN THE PRECEEDING PARAS AS TO HOW TO DETERMINE WHETHER TH E LAND IN QUESTION IS AN AGRICULTURAL LAND OR NOT AS PER THE ACT KEEPING IN VIEW THE DISTINCTION MADE BY THE ACT IN SECTION 2(14)(III)(A) AND 2(14)(III)(B) OF THE ACT AND THE NOTIFICATION ISSUED IN THE OFFICIAL GAZETTE BY THE CENTRAL GOVER NMENT FROM TIME TO TIME HAVING REGARD TO THE EXTENT OF , AND SCOPE FOR , UR BANISATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS . THE ASSESSEE HAS ALSO SUBMITTED THAT IT HAS OBTAINE D THIS AFORE-STATED REPORT FROM DY. DISTRICT OFFICER , RAMNAGAR, NAINITAL ON 2 4.1.2011 , AFTER HE WAS PREJUDICED BY THE ASSESSMENT ORDERS DATED 24.09.200 9 U/S 147 READ WITH SECTION 143(3) OF THE ACT PASSED BY AO WHEREBY THE AO HELD THAT THE LAND IN QUESTION WHICH WAS SOLD BY THE ASSESSEE IS NOT AN A GRICULTURAL LAND AS DEFINED UNDER THE ACT AND THE ASSESSEE IS LIABLE TO PAY C APITAL GAIN TAX , WHICH IN OUR OPINION IS A SUFFICIENT CAUSE WHEREBY THESE ADDITIO NAL EVIDENCES WHICH GOES TO THE ROOT OF THE MATTER NEED TO BE ADMITTED BY THE C IT(A) UNDER RULE 46A OF INCOME TAX RULES, 1962. WE , THEREFORE, HOLD THAT IN THE IMPUGNED APPEAL, THE ASSESSEE IS ENTITLED TO PRODUCE THE ADDITIONAL EVIDENCES AS PER RULE 46A O F THE INCOME TAX RULES,1962 BEFORE THE CIT(A) WHICH IS TO BE CONSID ERED ON MERITS BY CIT(A) AND HENCE, WE THEREFORE, SET ASIDE THIS ISSUE AND R ESTORE IT TO THE FILE OF THE CIT(A) TO DETERMINE WHETHER THE LAND IN QUESTION IS AN AGRICULTURAL LAND AS DEFINED U/S 2(14) OF THE ACT OR NOT AND TO DETERMIN E CORRECT LIABILITY OF THE ASSESSEE TO CAPITAL GAIN TAX, IN THE LIGHT OF SECT ION 2(14) OF THE ACT , RELEVANT NOTIFICATIONS ISSUED BY THE CENTRAL GOVERNMENT IN O FFICIAL GAZETTE FROM TIME TO 13 I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) TIME IN PURSUANCE OF ITEM(B) OF SUB-CLAUSE(III) OF CLAUSE 14 OF SECTION 2 OF THE ACT AND THE RELEVANT EVIDENCES PRODUCED BY THE ASSE SSEE IN HIS DEFENSE WHICH SHALL BE CONSIDERED BY THE CIT(A) ON MERITS . WE OR DER ACCORDINGLY. THE SECOND ISSUE RELATES TO THE INTEREST FREE LOAN OF RS.5,00,000/- RECEIVED BY THE ASSESSEE FROM HIS BROTHER WHICH IS TREATED BY AO AS A PART OF THE CONSIDERATION OF THE SALE OF AGRICULTURAL LAND TO T HE WIFE OF THE BROTHER OF THE ASSESSEE AND ACCORDINGLY CAPITAL GAIN WAS BROUGHT T O TAX BY THE ASSESSING OFFICER BY INCLUDING THIS RS. 5,00,000/- AS PART OF SALE CONSIDERATION , THE CONTENTIONS OF THE ASSESSEE HAS BEEN REJECTED BY TH E CIT(A) WHO HAS HELD THAT THE ASSESSEE IS NOT ABLE TO DISCHARGE THE BURDEN U/ S 68 OF THE ACT AND HENCE, THE ADDITION WAS CONFIRMED BY THE CIT(A). THE ASSES SEE SUBMITTED BEFORE US THE LOAN CONFIRMATION FROM HIS BROTHER SHRI RAGHUBE R DATTA BHATT WHICH CARRIES PAN NO. ALONG WITH THE BANK STATEMENT OF BR OTHER TO PROVE THE GENUINENESS, CREDITWORTHINESS AND IDENTITY OF THE L ENDER (WHICH ARE PLACED AT PAPER BOOK PAGES 43-45 ON RECORD). THE ASSESSEE REI TERATED ITS SUBMISSIONS AS MADE BEFORE AUTHORITIES BELOW WHILE LD DR RELIED UP ON THE ORDERS OF AUTHORITIES BELOW. THESE EVIDENCES SUBMITTED BY THE ASSESSEE REQUIRES VERIFICATION BY THE AUTHORITIES BELOW AND THE ASSES SEE HAS TO DISCHARGE THE ONUS CAST U/S SECTION 68 OF THE ACT TO THE SATISFAC TION OF THE AUTHORITIES BELOW FOR WHICH WE ARE SETTING ASIDE THE ORDERS OF THE CI T(A) AND REMITTING THE MATTER TO THE FILE OF THE CIT(A) FOR DE-NOVO ADJUDI CATION OF THE MATTER WITH RESPECT TO THE SATISFACTION OF THE MANDATE OF SECTI ON 68 OF THE ACT BY THE ASSESSEE . HOWEVER, AFTER EXAMINING THE DOCUMENTS ON RECORDS , WE ARE OF CONSIDERED VIEW THAT THE RECEIPT OF RS.5,00,000/- B Y THE ASSESSEE FROM HIS 14 I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) BROTHER MR RAGHUBER DUTT BHATT CANNOT BE CONSIDERED AS PART OF SALE CONSIDERATION OF THE AGRICULTURAL LAND SOLD BY THE ASSESSEE TO MRS KAUSHALYA DEVI ALIAS KUSUM BHATT W/O MR. RAGHUBER DUTT BHATT , WIFE OF BROTHER OF THE ASSESSEE AS NO COGENT MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SUBSTANTIATE ITS CLAIM THAT THE SAID LOAN OF RS.5,0 0,000/- FROM BROTHER OF THE ASSESSEE , MR RAGHUBER DUTT BHATT IS NOTHING BUT TH E SALE CONSIDERATION OF THE PROPERTY SOLD BY THE ASSESSEE EXCEPT SURMISES AND C ONJECTURES DRAWN BY THE REVENUE FROM THE FACT THAT THE ASSESSEE RECEIVED O NE CONSOLIDATED DRAFT FROM HIS BROTHER, MR RAGHUBER DUTT BHATT WHICH INCLUDED BOTH SALE CONSIDERATION OF RS.9,85,000/- FOR SALE OF PROPERTY AS PER REGIST ERED SALE DEED AND THE LOAN OF RS.5,00,000/- FROM MR RAGHUBER DUTT BHATT , BROT HER OF THE ASSESSEE WHICH IS NOT SUFFICIENT ENOUGH TO FASTEN LIABILITY AGAINS T THE ASSESSEE AS THE SALE DEED (PLACED IN PAPER BOOK ON RECORD AT PAGE 22-32) CLEA RLY REFLECTED THE SALE CONSIDERATION OF THE LAND AS RS.9,85,000/-, MORE-SO THE ASSESSEE HAS REBUTTED THE SAID PRESUMPTION OF THE REVENUE BY DULY FILING THE AFORE-STATED SALE DEED AND ALSO LOAN CONFIRMATION ALONG WITH PAN DETAILS ETC FROM HIS BROTHER , MR. RAGHUBER DUTT BHATT AND HENCE DUE TO LACK OF COGENT EVIDENCES, NO LIABILITY ON THIS GROUND CAN BE FASTENED AGAINST THE ASSESSEE ME RELY ON CONJECTURES, SURMISES AND ASSUMPTIONS AS IT IS WELL ESTABLISHED PRINCIPLE OF LAW THAT SUSPICION HOWSOEVER STRONG CANNOT TAKE THE PLACE OF EVIDENCE. IN OUR CONSIDERED VIEW , THE INTEREST OF JUSTICE WILL BE BEST SERVED IF THIS MATTER IS ALSO RESTORED TO THE FILE OF CIT(A) WITH THE DIRECT IONS TO CONSIDER THE EVIDENCES SUBMITTED BY THE ASSESSEE IN HIS DEFENSE AND DECIDE THE MATTER ON MERITS IN ACCORDANCE WITH THE LAW KEEPING IN VIEW THE MANDAT E OF SECTION 68 OF THE ACT 15 I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) WHICH THE ASSESSEE WILL HAVE TO SATISFY THE AUTHORI TIES BELOW ABOUT THE INTEREST FREE LOAN OF RS.5,00,000/- RAISED FROM HIS BROTHER . WE ORDER ACCORDINGLY. GROUND NO.4 RELATED TO DISALLOWANCE OF THE EXPENDIT URE OF RS.32,305/- INCURRED FOR RENDERING PROFESSIONAL SERVICES WHICH IS DEBITED BY THE ASSESSEE TO THE PROFIT AND LOSS ACCOUNT FOR WHICH THE ASSES SEE HAS NOT BEEN ABLE TO PRODUCE ANY EVIDENCE WITH RESPECT TO INCURRING OF THIS EXPENDITURE BEFORE THE AUTHORITIES BELOW AND HENCE BOTH THE AO AND THE C IT(A) HAS DISALLOWED THE SAID EXPENSES BY ADDING TO THE INCOME OF THE ASSESS EE . BEFORE US ALSO NO EVIDENCE HAS BEEN PRODUCED BY THE ASSESSEE REGARDIN G INCURRING OF EXPENDITURE OF 32,305/- FOR BUSINESS PURPOSE AND MERELY IT IS STATED BY THE ASSESSEE THAT THE SAID EXPENSES HAS BEEN INCURRED F OR THE PROFESSION OF THE ASSESSEE. THE LD DR RELIED UPON THE ORDERS OF AUTHO RITIES BELOW. HENCE, IN VIEW OF NO EVIDENCE SUBMITTED BY THE ASESSEE TO SU BSTANTIATE HIS CLAIM OF INCURRING OF SAID EXPENSES OF RS.32,305/- FOR PROFE SSION BY THE ASSESSEE, WE ALSO CONFIRM THE ADDITION OF RS.32,305/- MADE BY TH E AO AND AS CONFIRMED BY THE CIT(A). WE UPHOLD THE ORDERS OF THE CIT(A) WITH RESPECT TO THIS GROUND OF APPEAL. WE ORDER ACCORDINGLY. GROUND NO 5 WITH RESPECT TO HOLDING OF PROFESSIONAL INCOME OF RS 1,49,445/- OFFERED FOR TAXATION BY THE ASSESSEE AS ALSO OF THE INCOME FROM UNDISCLOSED SOURCES BY THE AO IS NOT PRESSED BEFORE US AS THE A SSESSEE SUBMITTED THAT THE CIT(A) HAS ALREADY SET ASIDE AND RESTORED THE MATTE R TO THE FILE OF AO. SINCE , THE GROUND IS NOT PRESSED BEFORE US, THE SAME IS DI SMISSED AS NOT PRESSED. WE ORDER ACCORDINGLY. 16 I.T.A. NO. 608/MUM/2013 (ASSESSMENT YEAR:2007-08) IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 13 , 2015 SD/- SD/- (SHAILENDRA KUMAR YADAV) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 13 .11.2015 PS:- POOJA K COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD F ILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI