Rajendra B. Raisoni, Pune V. Assistant Commissioner of Income-tax,

ITA 737/PUN/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5838 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-02-2018
• Assessment Year: 2007-2008
• Appeal Filed On: 19-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VIPIN GUJARATHI
• Keywords: Capital asset; Business income; Earning of tax free income; Cost of acquisition
• Section: 143(3); 2(14); 153A; 132

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.737/PUN/2015 / ASSESSMENT YEAR : 2007-08 RAJENDRA B. RAISONI, 401/402, POONAM PLAZA, MARKET YARD ROAD, MARKET YARD, PUNE 411 037. PAN : AASPR4761K. . / APPELLANT V/S THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 12, NASHIK. . / RESPONDENT ASSESSEE BY : SHRI VIPIN GUJARATHI. REVENUE BY : SHRI SUDHENDU DAS. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE O RDER OF COMMISSIONER OF INCOME TAX (A) 12, PUNE DATED 31.03.2015 FOR THE ASSESSMENT YEAR 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL. A SEARCH ACTION U/S 132 OF THE ACT WAS CONDUCTED ON 30.04.2010 AT THE RESIDENTIAL / BUSINESS PRE MISES OF DIFFERENT MEMBERS / ASSOCIATES / BUSINESS CONCERNS OF ASH OKA BUILDCON GROUP, NASHIK. ASSESSEE WAS ALSO COVERED BY THE SEARCH / DATE OF HEARING : 23.01.2019 / DATE OF PRONOUNCEMENT: 18.04.2019 2 ITA NO.737/PUN/2015 ACTION. ACCORDINGLY, NOTICE U/S 153A OF THE ACT WAS ISSUE D ON 25.02.2011 AND SERVED ON THE ASSESSEE ON 07.03.2011. IN RESPONSE TO THE NOTICE, ASSESSEE FILED THE RETURN OF INCOME ON 17.10.201 1 DECLARING TOTAL INCOME OF RS.10,34,372/- AND AGRICULTURAL INCOME OF RS.4,07,000/-. THEREAFTER, THE CASE WAS TAKEN UP FOR SCRU TINY AND ASSESSMENT WAS FRAMED VIDE ORDER DATED 26.03.2013 PASS ED U/S 143(3) R.W.S. 153A OF THE ACT AND THE TOTAL INCOME WAS DET ERMINED AT RS.1,27,07,120/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DATED31.03.2015 (IN A PPEAL NO.PN/CIT(A)-12/NSK CIT(A)-I/339/2013-14) GRANTED PAR TIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESS EE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. THE APPELLANT HAD ACQUIRED AGRICULTURAL LAND AT HINJEWADI IN THE FINANC I AL YEA R 1999-2000 . THE APPELLANT HAD SOLD THE SAID AGR I CULTURA L LAND VIDE SALE DEED DATED 31 S T AUGUST 2006 AND 18 TH DECEMBER 2006. THE APPELLANT HAD CLA I MED THE SURPLUS ARISING ON SALE AS EXEMPT AS ACCORDING TO THE APPELLANT THE SA I D AGRICULTURAL LAND WAS NOT THE ASSET WITHIN THE MEANING OF SECT I ON 2(14) OF THE I . T . ACT . THE L EARNED AO DID NOT ACCEPT THE CONTENTION OF THE APPE LLANT AND BROUGHT TO TAX THE SURPLUS UNDER THE HEAD ' PROFIT & GAINS OF BUSINESS ' INSTEAD OF LONG TERM CAPITAL GAIN. THE HONOURABLE C IT(A) CONFIRMED THE ACTION OF THE LEARNED AO TREATING THE SURPLUS AS PROFITS AND GA I NS OF BUSINESS . O N THE FACTS AND IN THE C I RCUMSTANCES OF THE CASE AND I N LAW THE HONOURABLE CIT(APPEALS) - PUNE ERRED IN CONFIRMING T HE ACTION OF THE LEARNED AO IN TREAT I NG THE SURPLUS/PROFIT ON SALE OF AGRICULTURAL LAND AT HINJEWADI RS . 1 , 04 , 94 , 502/- AS ' PROFITS AND GAINS OF BUSINESS ' I NSTEAD OF 'LONG TERM CAPITAL GAIN ' WITHOU T APPRECIATING THE FACTS OF THE CASE IN THE PROPER PERSPECT I VE. THE APPELLANT HEREBY PRAYS THAT THE SURPLUS/P R OFIT ARIS I NG ON SALE OF AGRICU L TURA L L AND MAY PLEASE BE TREATED AS LONG TERM CAPITAL GAIN . 2. ON THE FACTS AND IN LAW THE HONOURABLE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS . 4 , 33 , 745/- MADE BY THE LEARNED AO BY TREATING THE LONG TERM CAPITAL GAIN / ARISING FROM SALE OF LAND AT ' MANN ' AS PROFITS & GAINS OF BUSINESS AND T R EAT I NG THE CLAIM OF THE APPELLANT OF LONG TERM CAPITAL GAIN/LOSS AS INCORRECT WITHOUT AP PRECIATING THE FACTS OF THE CASE IN THE PROPER PERSPECTIVE . THE APPELLANT HEREBY PRAYS THAT THE ADD I TION MAY PLEASE BE DELETED . 3 ITA NO.737/PUN/2015 3. ON THE FACTS AND IN LAW THE HONOURABLE CIT(A) ERRE D IN CONFIRMING THE ADDITION MADE BY THE LEARNED AO OF THE AGRICULT URAL INCOME TO THE TUNE OF RS.4,07,000/- TREATING IT AS INCOME OF THE APPELLANT FROM UNDISCLOSED SOURCES INTRODUCED IN THE GUISE OF AGRI CULTURAL INCOME WITHOUT APPRECIATING THE FACTS OF THE CASE IN THE P ROPER PERSPECTIVE. THE APPELLANT THEREBY PRAYS THAT THE ADDITION MAY P LEASE BE DELETED. 3. AT THE OUTSET, LD.A.R. SUBMITTED THAT HE DOES NOT WIS H TO PRESS GROUND NO.3. IN VIEW OF THE AFORESAID SUBMISSION OF LD.A.R., G ROUND NO.3 IS DISMISSED AS NOT PRESSED. GROUND NOS.1 AND 2 BEIN G INTER- CONNECTED ARE CONSIDERED TOGETHER. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTIC ED THAT ASSESSEE HAD SOLD LAND AT HINJEWADI ON A PROFIT OF RS.1,04,9 4,502/- AND CLAIMED IT AS EXEMPT. THE ASSESSEE WAS ASKED TO JU STIFY HIS CONTENTION. ASSESSEE INTER-ALIA SUBMITTED THAT THE LAND W AS AGRICULTURAL LAND AND WAS BEYOND 8 KMS FROM THE BOUNDARIE S OF PUNE MUNICIPAL CORPORATION (PMC) APART FROM OTHER SUBMISSIONS. THE SUBMISSIONS MADE BY THE ASSESSEE WERE NOT FOUND ACCEPT ABLE TO THE AO. AO NOTED THAT ASSESSEE ALONG WITH OTHER PERSONS H AD ENTERED INTO DEED OF CONVEYANCE ALONG WITH INDOGLOBAL ERECTORS PVT. LT D., PUNE FOR SALE OF LAND AT HINJEWADI RESULTING INTO PROFIT OF RS.1,04,94,5 02/- WHICH WAS CLAIMED AS EXEMPT. HE NOTED THAT IN THE SALE D EED NOWHERE THE LAND HAS DESCRIBED AS AGRICULTURAL LAND. HE ALSO NOT ED THAT ASSESSEE HAD NOT SUBSTANTIATED HIS STAND THAT THE LAND IS AN AGRICULTURAL LAND. THE SUBMISSION OF THE ASSESSEE THAT THE DISTANCE OF HINJEWADI IS BEYOND 8 KMS FROM THE BOUNDARIES OF PMC WAS ALSO NOT ACCEPTED BY THE AO. HE ACCORDINGLY CONSIDERED THE PRO FIT ON SALE OF LAND OF RS.1,04,94,502/- AS BUSINESS INCOME OF THE ASSESSEE. 4 ITA NO.737/PUN/2015 5. AO ALSO NOTED THAT ASSESSEE SOLD LAND AT MAAN ON 30 .30.2007 FOR CONSIDERATION OF RS. 7 LAC. THE COST OF ACQUISITION WAS SH OWN AT RS.3,89,014/- AND THE COST OF IMPROVEMENT WAS SHOWN AS RS.2,86,500/- WHICH WAS CLAIMED TO HAVE BEEN DONE IN 200 1-02. AO ALSO NOTICED THAT ON SALE OF LAND, ASSESSEE HAD SHOWN TO HAVE INCURRED CAPITAL LOSS OF RS.38,060/-. AO NOTED THAT IN THE BALANCE- SHEET THE LAND WAS SHOWN AS UNDER CURRENT ASSET AS ON 31.03.2005 . AO THEREFORE HELD THAT SINCE THE LAND WAS SHOWN AS CURRENT ASSET THE PROFIT ON ITS SALE WAS BUSINESS INCOME. HE FURTHER NOTED THAT A SSESSEE HAD NOT FURNISHED THE DETAILS WITH RESPECT TO COST OF IMPROVE MENT OF RS.2,86,500/-. IN THE ABSENCE OF THESE DETAILS, HE CONCLU DED THAT IMPROVEMENT COST WAS TO REDUCE THE INCOME. HE ACCORDIN GLY RE-WORKED THE INCOME ON THE SALE OF LAND AND WORKED OUT THE PROFITS AT RS.3,95,685/- AND ADDED IT AS BUSINESS INCOME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MAT TER BEFORE LD.CIT(A), WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGR IEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW BEFORE US. 6. BEFORE US, LD.A.R. REITERATED THE SUBMISSION MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE WAS ENGAGE D IN THE BUSINESS OF DEALING IN CEMENT UNDER THE NAME AND STYLE OF SHUBHAM AGENCIES, THE PROPRIETARY CONCERN OF THE ASSESSEE. DU RING THE YEAR UNDER CONSIDERATION ASSESSEE HAD SOLD AGRICULTURAL LAND SIT UATED AT HINJEWADI, PUNE AND SHOWN THE SURPLUS ON THE SALE OF LAND AS EXEMPT. BUT AO TREATED THE PROFITS RECEIVED ON TRANSFER OF LAND A S BUSINESS INCOME. HE SUBMITTED THAT THE OBSERVATION OF THE AO TH AT ASSESSEE HAS BEEN DEALING IN LAND IS INCORRECT AS ASSESSEE IS NOT DEALING IN LANDS. HE SUBMITTED THAT ASSESSEE HAD ACQUIRED THE LAND FROM WAGH MARE FAMILY 5 ITA NO.737/PUN/2015 BY SEPARATE REGISTERED CONVEYANCE DURING THE FINANCIAL YEAR 2000-01 BY PAYING FULL STAMP DUTY APPLICABLE TO THE TRANSACTION. THE LAND WAS SOLD BY TWO SEPARATE REGISTERED SALE DEEDS DURING THE FINANCIAL YEAR 2006-07 TO INDO GLOBAL ERECTORS PVT. LTD., AND BASE REA LITY PVT. LTD. HE SUBMITTED THAT ASSESSEE DID NOT CARRY OUT ANY DEVE LOPMENT WORK IN THE LAND AND THE ADDITION TO THE COST OF THE LAND WAS ON LY ON ACCOUNT OF CAPITALIZATION OF THE INTEREST. HE SUBMITTED THAT THE LAND WAS HELD FOR AROUND 6 YEARS AND IT IS WAS A MAHAR VATAN LAND AND COULD NOT BE US ED FOR THE DEVELOPMENT OR ANY OTHER PURPOSE MENTIONED IN G RANT OF MAHAR VATAN WITHOUT PAYMENT OF NAZARANA. HE SUBMITTED THAT HE DID NO T PAY ANY NAJARANA AND IT WAS PAID BY BASE REALITY AND INDIGO GLOBAL ERECTORS ON 27.06.2007 I.E., AFTER THE TRANSFER OF LAND. H E FURTHER SUBMITTED THAT THE LAND WAS NOT CONVERTED INTO AN AGRIC ULTURAL LAND FROM THE DATE TILL IT WAS SOLD. IN RESPECT OF SALE OF SECON D LAND AT MANN, HE SUBMITTED THAT THOUGH THE LAND WAS SHOWN UNDER CUR RENT ASSET IN THE BALANCE-SHEET AS ON 31.03.2005 BUT THE ENTRIES IN TH E BOOKS OF ACCOUNTS WERE NOT CONCLUSIVE FOR DETERMINATION OF CHARACT ER OF ASSET AND FOR WHICH HE PLACED RELIANCE ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF KEDHRNATH JUTE MANUFACTURING CO., VS. CIT REPORTED IN 82 ITR 363. HE FURTHER SUBMITTED THAT HONBLE LD.CIT(A) DID NOT DECIDE AS TO WHETHER THE PROFIT HAS ARISEN FROM THE SALE OF LAND WAS CAPITAL GAIN OR PROFITS AND GAINS FROM THE BUSINESS BUT MIX ED THE ISSUE OF FRESH CLAIM IN THE ORIGINAL RETURN VIS--VIS RETURNS SUBMIT TED AND IN RESPONSE TO NOTICE U/S 153A OF THE ACT. HE FURTHER SUB MITTED THAT LD.CIT(A) DID NOT CONSIDER SEVERAL CONTENTIONS OF THE ASSES SEE IN RESPONSE OF THE STATUS OF AGRICULTURAL LAND. HE FURTHER SU BMITTED THAT SINCE ASSESSEE WAS NEVER ENGAGED IN THE LAND DEALING, THE GAINS ARISEN ON SALE OF TRANSACTION BEING THE SOLITARY TRANSACTION, CAN NOT BE 6 ITA NO.737/PUN/2015 CONSIDERED TO BE ADVENTURE IN NATURE OF TRADE AND FOR WHICH HE PLACED RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN T HE CASE OF ASHOK KUMAR JALAN VS. CIT REPORTED IN 187 ITR 316. CIT VS. JALAN KUMAR 316 (BOM). HE FURTHER PLACED RELIANCE ON THE DECISIO N OF HONBLE APEX COURT IN THE CASE OF G. VENKATA SWAMI NAIDU & CO. VS. CIT REPORTED IN 35 ITR 594. LD.D.R. ON THE OTHER HAND , SUPPORTED THE ORDER OF AO AND LD.CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO THE TREATMENT OF PROFIT ON SALE OF LAND. IT IS REVENUES CONT ENTION THAT THE PROFIT IS BUSINESS INCOME WHEREAS IT IS ASSESSEES CONTENT ION THAT IT IS EXEMPT INCOME. BEFORE US, ASSESSEE SUBMITTED THAT THE LA ND AT HINJEWADI WHICH HAS BEEN SOLD IS A MAHAR VATAN LAND AN D THE SAME CANNOT BE USED FOR DEVELOPMENT OR ANY OTHER PURPOSE UNDER THE GRANT OF MAHAR VATAN AND ASSESSEE HAD ALSO NOT PAID ANY NAZ ARANA TO THE GOVERNMENT TILL ITS SALE FOR CONVERTING THE PURPOSE OF LAND . IT IS FURTHER ASSESSEES CONTENTIONS THAT ASSESSEE HAS ALSO NOT TAK EN ANY ACTION FOR DEVELOPMENT OF LAND. THE AFORESAID CONTENTION OF THE ASSES SEE HAS NOT BEEN CONTROVERTED BY REVENUE. THE LAND HELD BY ASSESSE E FOR NUMBER OF YEARS IS INVESTMENT MADE BY ASSESSEE AND ITS SALE CANNO T BE HELD TO BE ADVENTURE IN NATURE OF TRADE AS ASSESSEE WAS NOT ENGA GED IN LAND DEALING. FURTHER, MERELY BECAUSE THE LAND HAS BEEN SHOW N UNDER THE HEAD CURRENT ASSETS, IT CANNOT BE CONSIDERED TO BE BU SINESS ASSET, IN VIEW OF THE RATIO OF THE DECISION OF THE HONBLE APEX COUR T IN THE CASE OF KEDARNATH JUTE MANUFACTURING CO., (SUPRA) WHEREIN IT HAS BEEN HELD THAT ENTRIES IN THE BOOKS ARE NOT CONCLUSIVE PROOF FOR D ETERMINING THE CHARACTER OF THE ASSET. WE FURTHER FIND THAT THE HONBLE APEX COURT IN 7 ITA NO.737/PUN/2015 THE CASE OF G. VENKATSWAMI NAIDU (SUPRA) HAS HELD THAT VARIOUS FACTORS WHICH ARE TO BE CONSIDERED IN DECIDING THE NATURE OF TRANSACTION. WHEN THE FACTS OF THE PRESENT CASE ARE S EEN IN THE LIGHT OF THE FACTORS STATED IN THE DECISION OF HONBLE APEX COURT IN THE CASE OF KEDARNATH JUTE MANUFACTURING CO., (SUPRA) AND IN VIEW OF THE SUBMISSIONS OF THE ASSESSEE, WE FIND FORCE IN THE SUBMISSION OF THE ASSESSEE THAT ASSESSEE IS NOT IN THE BUSINESS OF DEALING OF LAND MORE SO, WHEN NO BUSINESS FROM SALE OF LAND HAS BEEN SHOWN BY THE ASSESSEE IN EARLIER YEARS. FURTHER ASSESSEE HAS NOT CONVERTED THE LAND INTO NON- AGRICULTURAL LAND. THE SO CALLED ADDITION IN ASSET IS ON ACCO UNT OF CAPITALIZATION OF INTEREST. CONSIDERING THE TOTALITY OF THE AFOR ESAID FACTS, WE ARE OF THE VIEW THAT AO WAS NOT JUSTIFIED IN HOLDING T HE INCOME ON SALE OF LAND AT HINJEWADI AND MANN AS BUSINESS INCOME. ACC ORDINGLY, WE HOLD THAT GAIN ARISING FROM SALE OF LAND IS TO BE ASSED A S LONG TERM CAPITAL GAINS. HOWEVER, AO MAY VERIFY THE CLAIM OF ASSESSEE THAT LAND WAS BEYOND 8 KMS., FROM MUNICIPAL LIMITS. THE ASSESSEE IS D IRECTED TO FILE NECESSARY EVIDENCE IN THIS REGARD AND AO SHALL DECIDE T HE TAXABILITY OF LONG TERM CAPITAL GAINS IN ACCORDANCE WITH THE LAW, AFTE R GIVING REASONABLE OPPORTUNITY OF HEARING TO ASSESSEE. THUS, THE GROUNDS OF THE ASSESSEE ARE PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED ON 18 TH DAY OF APRIL, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER PUNE; DATED : 18 TH APRIL, 2019. YAMINI 8 ITA NO.737/PUN/2015 '#$%&'&$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-12, PUNE. CIT(CENTRAL), NAGPUR. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.