Sri Sant Kripa Textiles Pvt.Ltd., Hyd, Hyderabad V. ITO, Ward-3(1), Hyderabad, Hyderabad

ITA 771/HYD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2588 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-07-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 23-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V SREEKAR
• Keywords: Capital asset
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER I.T.A. NO. 771/HYD/2016 ASSESSMENT YEAR: 2005-06 M/S. SHREE SANT-KRIPA TEXTILES PVT. LTD., HYDERABAD [PAN: AACCS9046D] VS THE INCOME TAX OFFICER, WARD-3(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI MOHD. AFZAL, AR FOR REVENUE : SHRI V. SREEKAR, DR DATE OF HEARING : 07-09-2017 DATE OF PRONOUNCEMENT : 15-09-2017 O R D E R PER INTURI RAMA RAO, A.M. : THIS APPEAL FILED BY ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-10, HYDERABAD, DATED 29-01-2016 FOR THE AY. 2005-06. THE APPELLANT RA ISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), IS AGAINST THE LAW, WEIGHT OF EVIDENCE AND PROBABILITI ES OF CASE. I.T.A. NO. 771/HYD/2016 :- 2 - : 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER, WHEREIN, THE AG RICULTURAL LAND SOLD, WAS CONSIDERED AS AN ASSET FOR THE PURPOSE OF CAPITAL G AINS. 3. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONF IRMING THE ORDER OF THE ASSESSING OFFICER, WHEREIN, LONG TERM CAPITAL GAINS WERE DETERMINED AT RS. 14,24,877/ - ERRONEOUSLY BY CONSIDERING THE AGRICUL TURAL LAND AS NON- AGRICULTURAL LAND. 4. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR M ODIFY THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF THE APPEAL, IF IT IS CONSIDERED NECESSARY. 2. BRIEFLY, FACTS OF THE CASE ARE THAT THE APPELLANT IS A PRIVATE LIMITED COMPANY DULY INCORPORATED UNDER THE PROVISION S OF COMPANIES ACT, 1956. THE RETURN OF INCOME FOR THE AY. 2005-06 WAS FILED ON 24-01-2006 DISCLOSING TOTAL INCOME OF RS .NIL. THE SAID RETURN WAS PROCESSED U/S. 143(1) OF THE INCOME T AX ACT [ACT] ACCEPTING THE RETURNED INCOME. SUBSEQUENTLY, THE ASSESSI NG OFFICER (AO) HAD TO KNOW THAT THE APPELLANT HAD SOLD THE LAND, BUILDINGS AND MACHINERY FOR RS. 25,25,000/-. OUT OF WHICH THE CONSIDERATION FOR THE SALE OF LAND WAS RS. 19,51,500/- AND NO CAPI TAL GAINS ON SALE OF THIS LAND WAS OFFERED TO TAX CLAIMING TO BE AGR ICULTURAL LAND. THEREFORE, THE AO ISSUED A NOTICE U/S. 148 OF THE AC T PROPOSING TO RE-ASSESS THE PROFIT ARISING ON THE SALE OF LAND. THE SE LANDS WERE PURCHASED BY THE APPELLANT IN THE YEAR 1991 FOR A CONS IDERATION OF RS. 2,17,500/- AND SUBSEQUENTLY, THESE LANDS WERE CON VERTED INTO COMMERCIAL USE AND CONSTRUCTED SHEDS, LABOUR QUARTERS, BUILDING THEREON AND USED FOR BUSINESS PURPOSES. SUBSEQUENTLY, THESE LAND, BUILDINGS WERE SOLD FOR A SUM OF RS. 25,25,000/- OU T OF WHICH THE CONSIDERATION RECEIVED TOWARDS SALE OF LAND WAS RS. 1 9,51,500/-. HOWEVER, NO CAPITAL GAINS ON THE SALE OF LAND WAS OF FERED CLAIMING TO BE AGRICULTURAL LAND. THE AO WAS OF THE OPINION THAT ONCE THE I.T.A. NO. 771/HYD/2016 :- 3 - : AGRICULTURAL LAND CONVERTED INTO COMMERCIAL USE, THEN LAND CEASES TO BE AGRICULTURAL LAND AND THE PROFIT ARISING THEREON O N THE SALE OF LAND IS TAXABLE UNDER THE HEAD CAPITAL GAINS AND THE APPELLANT COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THE DETAI LS OF CROPS GROWN ON THE SAID LANDS AND SALE PATTIES IN SUPPORT OF THE SALE OF AGRICULTURAL PRODUCE. FINALLY IN RESPONSE TO SHOW C AUSE LETTER DT. 19-11-2009, THE APPELLANT HAS GIVEN REPLY AS UNDER: 'A) LETTER WAS GIVEN BY HAND ON DT:13-08-2009 AND I T WAS INFORMED THAT VEGETABLES & FLOWERS ETC. WERE GROWN BY THE FARMERS . B) IT WAS INFORMED THAT AGRICULTURE PRODUCTS WERE S OLD BY THE FARMERS WHO TOOK LAND FOR LEASE, HENCE SALE PATTIES ARE KEPT BY THEM ONLY. C) THE PIECE OF LAND WAS VERY SMALL AND USED TO BE GIVEN DIFFERENT FARMERS ON LEASE ON ORAL AGREEMENTS OF LEASE. D) LAND WAS USED TO BE GIVEN FOR AGRICULTURE PURPOS E TO FARMERS AND ASSESSEE HAVE SHOWN INCOME FROM AGRICULTURE LAND AS LEASE RENT IN LAST 4 YEARS OF INCOME TAX RETURNS, AS SUCH ASSESSEE NEVER ADMITTED THAT HE HAS NOT GOT AGRICULTURE INCOME. LEASE RENT OF LAND RECE IVED FROM THE FARMERS ARE THE NATURE OF AGRICULTURE INCOME. E) ORIGINALLY ONLY 10% OF LAND WAS USED FOR COMMERC IAL USE AND SINCE 2000, EVEN BUILDING WAS USED BY THE FARMERS FOR THE IR STORAGE AND SINCE 2000 THERE IS NO ACTIVITY OF COMMERCIAL USE AT THE SITE. TOTAL ACTIVITY AND USE OF LAND WAS FOR AGRICULTURE PURPOSE.' 3. THE ABOVE SUBMISSIONS WERE REJECTED BY THE AO BY CITING THE FOLLOWING REASONS: (I) THE ASSESSEE COULD NOT PROVE THE AGRICULTURAL ACTIVITY DONE DURING THE EARLIER YEARS AND CONCERNED FINANCIAL YEAR I.E., 20 04-05. (II) THE ASSESSEE HAS NOT FURNISHED ANY DETAILS OF FARMERS TO WHOM THE LAND WAS GIVEN ON LEASE. (III) THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE IN RESPECT OF HIS CLAIM THAT THE LAND WAS GIVEN ON LEASE. I.T.A. NO. 771/HYD/2016 :- 4 - : (IV) THE ASSESSEE HAS NOT PROVED THAT THE LAND HAS BEEN USED FOR AGRICULTURAL PURPOSE AT THE TIME OF TRANSFER OF THE LAND. (V) THE ASSESSEE HAS NOT PRODUCED ANY SALE PATTIES IN RESPECT OF THE CROPS GROWN AND SOLD. 3.1. ACCORDINGLY THE AO BROUGHT TO TAX THE PROFIT MADE ON THE SALE OF LAND UNDER THE HEAD LONG TERM CAPITAL GAIN. 4. ON APPEAL BEFORE THE CIT(A), LD.CIT(A) VIDE IMPUG NED ORDER HAD DISMISSED THE SAME BY HOLDING AS UNDER: 7.1 IT WAS NOTICED BY THE ASSESSING OFFICER THAT T HOUGH THE LAND SOLD WAS CLAIMED TO BE PURCHASED AS AGRICULTURAL LA ND THE SAME WAS CONVERTED INTO BUSINESS ASSET AND CONSTRUCTED SHEDS , LABOUR QUARTERS, BUILDING ETC., AND BUSINESS OPERATIONS WERE CARRIED OUT. AS SUCH NOTICE U/S. 148 WAS SERVED ON THE ASSESSEE. IT WAS SEEN TH AT THE LAND WAS PURCHASED IN THE YEAR 1991 FOR A CONSIDERATION OF R S. 2,17,500/-. THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE LIKE CROPS GR OWN, BILLS / SALE PATTIS IN RESPECT OF SALE OF AGRICULTURAL PRODUCE AND COPY OF LEASE AGREEMENT IF ANY. 7.2 IT WAS ALSO FOUND THAT NO AGRICULTURAL INCOME W AS ADMITTED EVEN DURING EARLIER YEARS. IT WAS CLAIMED BY THE ASSESSE E THAT THE LAND WAS GIVEN ON LEASE AND VEGETABLES AND FLOWERS WERE GROW N BY THE FARMERS AND PRODUCE WAS SOLD BY THEM AND THEREFORE SALE PAT TIS ARE AVAILABLE WITH THEM ONLY. THE PIECE OF LAND WAS VERY SMALL AND WAS GIVEN TO DIFFERENT FARMERS ON LEASE ON ORAL AGREEMENTS. INCOME FROM LE ASE AND LAND WAS ADMITTED IN THE INCOME TAX RETURN FOR THE LAST 4 YE ARS. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSES SEE AS NO PROOF WAS GIVEN FOR THE AGRICULTURAL ACTIVITY DURING THE EM1I ER YEARS AND NO DETAILS OF FARMERS WERE GIVEN AND NO DOCUMENTARY EVIDENCE FOR LEASING OF LAND WAS ALSO SHOWN AND THE ASSESSEE DID NOT PRODUCE SALE PA TTI IN RESPECT OF CROPS GROWN. 7.3 IN THE STATEMENT OF FACTS THE ASSESSEE CONTENDE D THAT ONLY PART OF THE LAND WAS USED FOR MANUFACTURING ACTIVITY AND REST OF THE LAND WAS USED FOR THE PURPOSE OF AGRICULTURAL ACTIVITY AND S INCE THE COMMERCIAL USE OF THE LAND WAS STOPPED AS THE COMMERCIAL ACTIVITY OF THE COMPANY CAME TO STAND STILL AND THE ASSESSEE DECLARED LEASE RENT ALS FROM THE AGRICULTURAL EXPLOITATION OF LAND. AS FOUND BY THE ASSESSING OFF ICER THE ASSESSEE DID NOT FURNISH THE NAMES AND ADDRESS OF THE FARMERS WH O TOOK THE LAND ON I.T.A. NO. 771/HYD/2016 :- 5 - : LEASE FOR ANY OF THE YEARS OR AT THE TIME OF TRANSF ERRING THE LAND. NO AGRICULTURAL INCOME WAS ADMITTED BY THE ASSESSEE. T HE LAND SOLD WAS ADMITTEDLY CONVERTED AND USED FOR COMMERCIAL PURPOS ES AND IT CANNOT AGAIN BE CLAIMED AS AGRICULTURAL LAND. IT IS ONLY A CAPITAL ASSET. THEREFORE, NO CREDENCE CAN BE GIVEN FOR THE SUBMISSIONS MADE B Y THE ASSESSEE IN SUPPORT OF ITS CLAIM THAT THE LAND SOLD WAS ONLY AG RICULTURAL LAND AND NO CAPITAL GAINS CAN BE LEVIED. THEREFORE, THESE GROUN DS OF APPEAL ARE DISMISSED. 5. BEING AGGRIEVED, APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 6. THE LD.AR VEHEMENTLY CONTENDED THAT ASSESSEE WAS USI NG ONLY A PART OF LAND FOR THE BUSINESS PURPOSE OF THE L AND. REST OF THE LAND WAS ALWAYS BEING USED FOR THE PURPOSE OF AGR ICULTURAL ACTIVITIES. SINCE THE YEAR 2000, THERE WAS NO COMMERCI AL ACTIVITY BEING CARRIED ON THE SAID LAND, WAS BEING USED AS A GRICULTURAL LAND AND THE APPELLANT WAS OFFERING LEASE RENTALS FROM THE S AID LANDS. HE ALSO DRAWN OUR ATTENTION TO THE CERTIFICATE ISSUED BY THE TAHSILDAR, SHAMSHABAD, DT. 28-08-2009 WHICH STATES THAT THE LAND SITUATED IN SURVEY NO. 16/A, 16/AA OF KISHANGUDA VIL LAGE, CLASSIFIED AS AGRICULTURAL LANDS FOR THE FINANCIAL YE AR 2005-06 AND HE FURTHER STATES THAT THE DISTANCE BETWEEN THE SAID LAND S AND THE NEAREST MUNICIPALITY IS 9KM. THIS CERTIFICATE WAS OB TAINED BY THE AO ON 28-08-2009. HE ALSO PLACED BEFORE US A COPY OF ADANGAL- PAHANI RECORDS FOR 1994-95 DISCLOSING THAT THE SAID LA NDS WERE DRY LANDS WITH BOREWELL. 7. ON THE OTHER HAND, THE LD.DR PLACED RELIANCE ON THE ORDERS OF THE LOWER AUTHORITIES. I.T.A. NO. 771/HYD/2016 :- 6 - : 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE IN THE PRESENT AP PEAL IS WHETHER THE LANDS SOLD BY THE APPELLANT ARE IN THE NATUR E OF AGRICULTURAL LANDS OR NOT? NO DOUBT, ASSESSEE HAD PU RCHASED THE LAND IN THE YEAR 1991 AS AGRICULTURAL LAND. THE SAME WERE CONVERTED TO COMMERCIAL USE AND THE FACTORY BUILDINGS, WORKERS QUARTERS WERE CONSTRUCTED THEREON. THIS GOES TO PROVE TH AT THE LANDS WERE HELD AS BUSINESS ASSET AND THE PURPOSE OF HOLDING THE LAND IS ONLY FOR BUSINESS PURPOSE. THERE IS NOTHIN G ON RECORD SUGGESTING THAT ON CESSATION OF BUSINESS ACTIVITY, THE A PPELLANT HAD CARRIED ON THE AGRICULTURAL OPERATIONS IN THE SAID LAN DS BY REMOVING THE SHEDS AND WORKERS QUARTERS. IT IS A MA TTER OF FACT THAT EVEN THE SHEDS AND QUARTERS WERE SOLD AS IT IS CON DITION, WHICH IS EVIDENT FROM THE RECITALS TO THE SALE DEED. TH EREFORE, THIS CLEARLY PROVES THAT THE NATURE OF LAND AS ON THE DATE OF SALE OF THE LANDS CONTINUES TO BE NON-AGRICULTURAL. RELIANCE WAS PLACED BY THE PAHANI RECORDS IS OF NO ASSISTANCE TO THE ASSESSEE AS THE PAHANI RECORDS ARE RELATING TO THE YEAR 1994-95. FURTHER, THE REPORT (CERTIFICATE) ISSUED BY THE TAHSILDAR, SHAMSHABAD MA NDAL, REQUIRES TO BE SEEN WITH REFERENCE TO THE PAHANI RECORDS. IT IS BEYOND OUR COMPREHENSION AS TO HOW THE LOCAL REVENUE AUTHORITIES H AVE PERMITTED THE APPELLANT TO CONSTRUCT THE SHEDS AND FACTORY STAFF QUARTERS ON THE AGRICULTURAL LANDS WHEN THE LANDS WERE CLASSIFIED TO BE AGRICULTURE AS PER THE REVENUE RECORDS. THEREFOR E, NO CREDENCE CAN BE GIVEN TO THE CERTIFICATE ISSUED BY THE TAHSILDAR, SHAMSHABAD MANDAL AS THE CERTIFICATE ISSUED BY THE TAH SILDAR, SHAMSHABAD MANDAL OF REVENUE RECORDS IS NOT A CONCLU SIVE PROOF AS TO THE NATURE OF THE LAND. THE ASSESSEE-COMPANY ALS O FAILED TO CONTROVERT THE FINDINGS OF THE AO THAT THE LANDS WERE B USINESS I.T.A. NO. 771/HYD/2016 :- 7 - : ASSET. THEREFORE, IN THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE AO WAS RIGHT IN HOLDING THAT THE LANDS S OLD WERE NOT IN THE NATURE OF AGRICULTURE AND RIGHTLY BROUGHT THE PROFIT ON THE SALE OF SAID LANDS UNDER THE HEAD LONG TERM CAPI TAL GAIN. HENCE THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE D ISMISSED. 9. IN THE RESULT, APPEAL OF ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH SEPTEMBER, 2017 SD/- SD/- (D. MANMOHAN) (INTURI RAMA RAO) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 15 TH SEPTEMBER, 2017 TNMM I.T.A. NO. 771/HYD/2016 :- 8 - : COPY TO : 1. M/S. SHREE SANT-KRIPA TEXTILES PVT. LTD., C/O. M OHD. AFZAL, ADVOCATE, 11-5-465, SHERSONS RESIDENCY, FLA T NO. 402, CRIMINAL COURT ROAD, RED HILLS, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-3(1), HYDERABAD. 3. CIT (APPEALS)-10, HYDERABAD. 4. THE CIT-(IT&TP), HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.