Hiren Jasubhai Patel, Vadodara V. Income Tax Officer, (International Taxation), Surat

ITITA 1/SRT/2023

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 3855 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 10-03-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 07-02-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 28-02-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: REFERRING
• Keywords: Business income; Capital asset; Income from undisclosed sources; Capital Gains; Loose papers; Opportunity of cross examination; Bogus
• Section: 147; 148; 143(2); 13; 144C; 2(14); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER IT(IT)A No. 01/Srt/2023 (Assessment Year 2017-18) (Hybrid hearing) Hiren Jasubhai Patel, 1, Patel Khadki Dashrath, Vadodara, (Gujarat)-391740. PAN No. AYEPP 6551 D Vs. I.T.O.(International Taxation), Surat. Appellant/ Assessee Respondent/ Revenue Assessee represented by Shri Bandish Soparkar, Advocate Department represented by Shri Ravi Kant Gupta, CIT-DR Appeal instituted on 01/03/2023 Date of hearing 08/02/2024 Date of pronouncement 11/03/2024 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the assessment order dated 20/01/2023 passed under Section 147 read with Section 144C(13) of the Income Tax Act, 1961 (in short, the Act) passed in pursuance of direction of learned Dispute Resolution Patel-2, Mumbai [in short, the ld. DRP] dated 29/09/2022 for the Assessment Year (AY) 2017-18. The assessee has raised following grounds of appeal: “1. Ld. A.O. erred in law and on facts in assuming jurisdiction to frame assessment inasmuch as there is no valid sanction u/s 151 for issuance of notice u/s 148. Subsequent Assessment order is also bad and illegal. 2. Ld. A.O. erred in law and on facts in assuming jurisdiction to frame assessment inasmuch as the notice issued u/s 148 is time barred. Subsequent assessment order is also bad and illegal. IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 2 3. Ld. A.O. erred in law and on facts in issuing notice u/s 148 to reassess the case of the appellant. The very reopening is bad and illegal. 4. Ld. A.O. erred in law and on facts in passing the Assessing Order in violation of provisions of Section 144B, Ld. A.O. neither issued a show cause notice alongwith a draft assessment order nor provided an opportunity of personal hearing. The assessment order is passed in violation of Section 114B and therefore is bad and illegal. 5. Ld. A.O./DRP erred in law and on facts in holding that the sale of agricultural land by the appellant is not exempt. 6. ld. A.O./DRP erred in law and on facts in making the addition of Rs. 2,11,66,760/- as undisclosed Long term capital gain. 7. Ld. DRP erred in law and on facts in not adjudicating the ground raised in relation to the addition of Rs. 2,11,66,760/- as undisclosed long term capital gain. 8. Ld. A.O./DRP erred in law and on facts in making addition of Rs. 11,99,72,500/- as undisclosed long term capital gain income of the appellant. 9. Ld. A.O./DRP erred in law and on facts in placing reliance on documents and statements that are false and bogus in making addition of Rs. 11,99,72,500/- as undisclosed long term capital gain income of the appellant.” 2. At the outset of hearing, the learned Authorised Representative (ld. AR) of the assessee submits that he is not pressing grounds No. 1,2, 3 and 4 of the appeal. On the other hand, the learned Commissioner of Income Tax-Departmental Representative (ld. CIT-DR) for the revenue has raised no objection if the ld. AR of the assessee did not press the above mentioned grounds of appeal. Considering the submissions of ld. AR of the assessee, grounds No. 1,2,3 and 4 of appeal are dismissed as not pressed. 3. Brief facts of the case qua the remaining grounds of appeal raised by the assessee are that the assessee is a Non-Resident Indian (NRI), filed his original return of income for A.Y. 2017-18 on 02/10/2017 declaring total income of Rs. 5,70,640/-. Subsequently, the case of assessee was IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 3 reopened under Section 147 on the basis of information that a survey under Section 133A of the Act was carried out by the Investigation Wing, Vadodara on 14/1/2019 in case of Manpasand Beverages Ltd.. During the course of survey and post survey proceedings, it came to the notice that Manpasand Beverages Ltd. has purchased land in block No. 1769 situated at village Manjusar, Taluka-Savli, District-Vadodara for expansion of their factory from assessee on cash payment. On the basis of information, the Assessing Officer was of the view that the capital gain in the hands of assessee was required to be taxed. In the survey action, a Banakhat dated 04/07/2016 was found which contained the transaction of land at Rs. 14.14 crores, took place between the assessee and Manpasand Beverages Ltd. On the basis of such Banakhat, the assessee was paid Rs. 11.99 crores in cash out of unaccounted income, which is not recorded in their books of account which was admitted during the course of survey proceedings. In post survey investigation, information was also called from assessee, who was residing in United Kingdom (UK) about the sale of land. In response to such query, the assessee submitted that he has sold land for an amount of Rs. 2.25 crores on 18/10/2016. As the assessee has not offered capital gain in his income tax return on sale of said land, thus the Assessing Officer was of the view that the income of assessee has escaped assessment. The assessee has not shown any agricultural income. IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 4 4. The Assessing Officer after obtaining necessary approval/permission, issued notice under Section 148 of the Act dated 31/03/2021 to assessee through system as well as by way of speed post. In response to notice under Section 148 of the Act, the assessee filed return of income on 29/04/2021 declaring income of Rs. 6,79,320/-. The reasons recorded were provided to the assessee on 06/05/2021. Later on the case was transferred to Income Tax Officer (International Taxation), Surat as the assessee is not an Non Resident Indian (NRI). The Assessing officer after serving statutory notices under Section 143(2) of the Act dated 27/12/2021 proceeded for reassessment. The Assessing Officer issued show cause notice dated 21/02/2022. Contents of show cause notice is recorded in para 3 of draft assessment order. In the show cause notice, the Assessing Officer recorded that the assessee has not shown undisclosed long term capital gain, earned during the relevant financial year in return of income, in response to notice under Section 148 of the Act. The Assessing officer also referred the figure of Banakhat and the alleged cash receipt received by the assessee in his show cause notice. 5. The assessee filed his reply dated 28/02/2022. The contents of reply are recorded by Assessing officer in para 4 of draft assessment order. In the reply, the assessee stated that his case was selected for scrutiny on the basis of information available on department’s portal based on survey proceedings and post survey proceedings on a Banakhat dated IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 5 14/07/2016 of Rs. 14.14 crores found to Income Tax Department. And merely on such document, a show cause notice was issued to the assessee for making addition of entire amount of Rs. 14.14 crores, which includes sale consideration of Rs. 2.15 crores shown on the sale deed dated 18/10/2016 for sale of agriculture land, on the basis of which, the Assessing officer is having information that the assessee has received sale consideration of Rs. 11.99 crores in cash. The assessee submitted that in the assessment, he has filed detailed explanation with necessary evidence to prove that the assessee has sold agricultural land and he has not received even a single rupee in cash for sale consideration of agricultural land at block No. 1769, village-Manjusar, Taluka Savli, District-Vadodara on 18/10/2016. He has already filed his reply on 09/05/2021 and 21/01/2022 and in addition, the assessee submitted that he has sold agricultural land which is exempt from taxation, he has not received any cash amount during the year and hence no addition is liable to be made in his total income. The assessee further submitted that the land was purchased by him in 1986, the land is situated beyond 8 KM from the municipal limit and the population of village where the land is situated is below 10000, so the land cannot be considered as capital asset, hence any capital gain arises from sale of such agricultural land is exempt and not liable for any capital gain tax. The assessee also filed affidavit of Talati showing that the distance of land is more than 8 KM and population of IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 6 village where the land is situated is less than 10000. The assessee also submitted that the has not received any amount in cash. The assessee also filed affidavit duly notarized by Notary Public but he has sold the land at Rs. 2.15 crores to Manpasand Beverages Ltd. on 18/10/2016. The assessee specifically contended that he has neither executed nor signed any Banakhat on 04/07/2016. The assessee further explained that he is an NRI and arrived in India on 17/02/2022 only for 15 days and such show cause notice is issued to me for making addition of Rs. 14.14 crores. The assessee also submitted that on the date of Banakhat, he was not in India. The assessee also stated that Manpasand Beverages Ltd. has violated many statutory provisions and has been delisted from recognized exchange from fraudulent activities carried out by their management. The assessee furnished his details of arrival and departure from India from 25/08/2011 to 17/02/2022. To support his contention that the consideration received on agricultural land is exempt, relied on certain case laws. The assessee made specific request to allow cross examination of the Directors, Employees of Manpasand Beverages Ltd. on whose statement or evidence, the claim of receiving cash money/own money is based. Information is based on the statement of third party which is not supported with corroborative evidence of the fact that such amount was received by the assessee. So there cannot be any prima facie believe that the assessee has received unaccounted/undisclosed money. Neither the IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 7 basis of general allegation of third party nor the statement of third party is provided nor opportunity of cross examination is allowed and there is no nexus is proved of the names mentioned on the Banakhat with assessee so no addition can be made in his assessment proceedings. The assessee also stated that mere report is not sufficient to arrive on a conclusion that the assessee in fact received cash consideration when there is no nexus between the seized document or relationship with the assessee. 6. The reply/submission of assessee was not accepted by the Assessing officer. The Assessing Officer in para 5 of draft assessment order held that claim of assessee that the land is agricultural land is not valid. The assessee sold the land to Manpasand Beverages Ltd. Vadodara. The assessee cannot sale agriculture land to other than agriculturists so the argument of assessee is not acceptable. The assessee has executed sale deed dated 18/10/2016 for a consideration of Rs. 2.15 crores which shows that the assessee having contract with Manpasand Beverages Ltd., hence there is possibility of receipt of on-money of Rs. 11.99 crores in cash. On the verification of arrival and departure recorded on passport, the Assessing officer noted that passport is verified. The department found that Banakhat was executed on 04/07/2016 between Shri Kamlesh haribhai Patel and Manpasand Beverages Ltd. and not between the assessee and Manpasand Beverages Ltd, such fact is irrelevant. On the IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 8 request of assessee for supply of statement of employee/ directors/persons of Manpasand Beverages Ltd., the Assessing officer recorded that during the course of survey proceedings, a wooden safe found in the factory premises of Manpasand Beverages Ltd. under the custody of Shri Anil Kantilal Bhavsar who was unable to open the safe. Shri Paresh Thakkar Chief Financial Officer (CFO) was asked to called locksmith to open the safe. The safe was broke open in presence of Shri Paresh Thakkar wherein certain loose papers were found and inventorised as Annexure-A5. During the survey, his statement was recorded and was asked to explain the cash payment voucher mentioned at page No. 29 to 89. In his reply, Shri Paresh Thakkar stated that these are cash payments made for purchase of land at Block No. 1769 and that such payment is not recorded in their regular books of account or in any individual account of the Directors. Relevant part of statement of Paresh Thakkar is mentioned in the draft assessment order. On the basis of statement, the Assessing Officer inferred that from the statement of Paresh Thakkar it is established that Manpasand Beverages Ltd. made cash payments on land deal. The case was paid through Shri Kamlesh Haribhai Patel as evident from Banakhat dated 04/07/2016. The consideration as per sale deed is Rs. 2.14 crore and as per Banakhat, it is Rs. 14.14 crores, thus remaining amount of Rs. 11.97 crores was paid in cash to the owner. IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 9 7. The Assessing officer further noted that on the sale deed, it is mentioned that necessary permission for use of non-agricultural purpose will be received as per time limit and that the land was converted from agricultural land to non-agricultural land. The land was transferred on a condition for converting into a non-agricultural land (NA) within 90 days and in case not converted, the sale deed will automatically get cancelled. Thus, the land sold for agricultural purpose is the capital asset as per Section 2(14) of the Act. The claim of assessee is irregular. On the basis of such observation, the Assessing Officer issued show cause notice as to why capital gain on sale of land of Rs. 2.15 crores should not be treated as long term capital gain and added to the income of assessee. The assessee in his reply, reiterated the same submission. The submission of assessee was not accepted by Assessing officer. The Assessing Officer held that a non-agriculturist cannot be purchase an agriculture land in State of Gujarat. If a non-agriculturist purchased agriculture land for bonafide industrial purpose as per Section 63AA then the land is to be treated as non-agricultural land. The stamp duty is also charged as per jantri rate of non-agriculture land. On execution of sale deed, the transfer of property does not take place in favour of purchaser. Record of 7/12 changes only when land is converted into non-agriculture land. The transfer was a conditional for converting into a non-agricultural land if the land is not converted within 90 days to non-agricultural land, the sale deed IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 10 would automatically get cancelled, thus exemption claimed by assessee under Section 2(14)(iii) of the Act was irregular and need to be taxed. The Assessing Officer accordingly by allowing the cost of purchase and benefit of indexation worked out undisclosed long term capital gain of Rs. 2.11 crores. The assessing officer made addition of Rs. 2.11 of long term capital gain. 8. The Assessing Officer also made addition of Rs. 11.99 crores on account of unaccounted long term capital gain against receipt of on-money. Before making such addition, the Assessing Officer noted that as per the information, the assessee has sold such land to Manpasand Beverages Ltd. and in survey proceedings, a Banakhat was found from the premises of Manpasand Beverages Ltd.. Certain vouchers were impounded from the premises of Manpasand Beverages Ltd. during the survey which clearly indicates the name of Shri Kamlesh Haribhai Patel on the vouchers, such signature are matching with signature on Banakhat and on sale deed which proved that the assessee has received cash amount of Rs. 11.99 crores. On the basis of aforesaid observation, the Assessing Officer issued show cause to the assessee as to why cash amount of Rs. 11.99 crores should not be treated as undisclosed long term capital gain. The assessee filed his reply. which was not accepted by Assessing Officer, the Assessing Officer reiterated his contention that during the survey proceedings on Manpasand Beverages Ltd. certain loose papers, cash voucher and IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 11 Banakhat was found showing the payment of cash amount on the basis of Banakhat. The assessee has shown only Rs. 2.15 crores consideration, therefore, remaining amount was treated as received in cash and brought to tax as long term capital gain. The assessing officer further made addition of unaccounted long term capital gain of Rs. 11.99 Crore. 9. The assessing officer find that the assessee is NRI, thus, the provisions of Section 144C of the Act are applicable, accordingly the draft assessment was prepared by assessing officer and forwarded to the assesse for proposed addition for seeking acceptance of assessee or to file objection to ld. DRP within 30 days of receipt of draft assessment order. The assessee exercised his option for filing objection before the ld. DRP instead of filing appeal before Commissioner of income tax (Appeals). Before the ld. DRP, the assessee challenged the validity of reopening as well as both the additions of long term capital gains on merit and filed detailed written submissions. The contents of various written submissions are recorded in the order of ld. DRP in para-6 of their order. The assessee in its written submissions submitted that the assessee sold agricultural land during the relevant financial year under consideration for a total sale consideration of Rs. 2.15 Crore. The rural agricultural land is not capital asset as per the definition under Section 2(14)(iii) of the Act. The assessee furnished certificate of Talati to substantiate that land was used for agricultural purpose and distance from any nearby local authority is IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 12 beyond 8 KM and the population of nearby local authority is below 10000. Google Map distance and Census data available online was also furnished. Against the addition of Rs. 11.99 crores of undisclosed long term capital gain, the assessee submitted that he filed his affidavit/declaration that he has not filed any Banakhat. Banakhat does not bear the signature of assessee. He has not given any power to anyone to execute such Banakhat. The assessee was not in India on the date of execution of Banakhat. Copy of his passport was also furnished. The assessee stated that ITO (International Taxation) [ITO(IT)], Surat provided copy of such Banakhat to assessee on 16/11/2022. No other documents were provided to the assessee despite request through e-mail to ITO concerned. The assessee contended that he has seen Banakhat for the first time at the time of making his submission before the ld. DRP. The assessee submitted that the assessee was not in India during the period of execution of Banakhat. He has filed his affidavit that he has not executed such Banakhat. The document is invalid and having its effect as void ab initio. The name of Kamlesh J Patel is mentioned as joint seller of the land. However, the assessee is exclusive owner of land. Kamlesh J Patel was not having any authority or attorney on behalf of assessee. Banakhat is not a valid document which was a result of fraudulent act and fake document. The condition of valid sale is not fulfilled by mere executing Banakhat. As per the Banakhat, six cheques out of four cheques of Rs. IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 13 8.00 lacs each and two cheques of Rs. 9.00 lacs each aggregating to Rs. 50.00 lacs to the assessee against the advance of sale of land. None of the cheques were honoured and none of the cheques were matching with the cheque mentioned in the sale deed. Banakhat is not even notarized at the time of execution. No signature of witness is available on such Banakhat. The value of land is mentioned at Rs. 14.14 crores which is much higher than the market value of land. As per the media reports, officials of purchaser company were committed a fraud in Goods and Services Tax (GST) as reported in the media. Their auditors resigned. The assessee also made prayer for providing the other documents on which the Assessing Officer relied, to verify the genuineness of transaction, adopt valid consideration i.e. price of transaction to treat the Banakhat as invalid and void ab initio. 10. The assessee again vide submission dated 02/12/2022, submitted that as per direction in the virtual hearing before DRP on 22/11/2022, the Assessing Officer has provided copy of voucher of cash payment, copy of statement of Paresh Thakkar and some additional documents received through e-mail dated 28/11/2022 from ITO(IT), Surat. The assessee received copy of power of attorney dated 16/09/2022, list/inventory of books of account found and impounded during the survey on Manpasand Beverages Ltd. on 14/11/2019 and bank statement. On such document, the assessee gave his detailed explanation in his submission dated IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 14 02/12/2022 about the alleged Banakhat as well as transactions recorded therein. The assessee also challenged the authority of Kamlesh Patel about execution of alleged Banakhat. No payment shown in the Banakhat was received by assessee. The assessee also disputed the cash payment shown in the voucher found during the survey action in Manpasand Beverages Ltd.. The assessee specifically stated that in the land he was growing tobacco which is shown in 7/12 extract. The assessee by referring the answer of question No. 15 of Paresh Thakkar wherein he explained that whole transactions of sale of land was planned and executed by Vijay Panchal, Dhruv Agarwal and Dhirendra Singh. The assessee asked to allow cross examination of Vijay Panchal, Dhruv Agarwal and Dhirendra Singh. The assessee further stated that as per statement of Paresh Thakkar, the assessee and Kamlesh J Patel were not involved in the transaction. 11. The ld. DRP after considering the draft assessment order and submission of assessee recorded the summary of their discussion in para 6 at page no. onwards of their order and recorded that the assessee has not disputed that the land was transferred subject to conditions of Section 63AA of the Gujarat Tenancy and Agriculture Land Act, 1948 (in short, Land Tenancy Act). As per assessee’s own admission, such permission was granted on 17/01/2017 under Section 63AA and change of land use (non-agriculture), permission under Section 65B of the GTAL Act on 14/09/2017 and land records were modified. The ld. DRP was of the view IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 15 that the land was purchased by purchaser for bonafide use of industrial purpose, if not used such land, same would not have been recognized. To ascertain the nature of transaction and character of land, the ld. DRP referred the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Siddharth J Desai (1983) 139 ITR 626 (Guj) and the decision of Hon'ble Supreme Court in Sarifabibi Mohmed Ibrahim Vs CIT (1993) 204 ITR 631 (SC) and Rajasthan High Court Mahaveer Enterprises Vs Union of India (2000) 244 ITR 789 (Raj). On the basis of aforesaid decisions, the ld. DRP noted that the proximity of land to building and building site, sale of land for non-agriculture purpose, the sale of land by a measure with reference to square yards and not acres. The character of land, the purpose of which the land was held by owner, the price of land if land is not put to use for agriculture by purchaser, use of land prior to sale or mere use in remote past would not make it agricultural. By applying such test, the ld. DRP was of the view that the most of the conditions as laid down in the referred cases are fulfilled especially when the location of the land is considered by referring its location shown in the Banakhat wherein on East side, road was shown, in West, there is scheme of Shravan Flat, North-Shravan Flat and land with block No. 1770 and in South, Manpasand Beverages Ltd.. On referring and considering such facts, the ld. DRP rejected the contention of assessee about exemption claimed by assessee under Section 2(14)(iii) of the Act. IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 16 12. On the addition of Rs. 11.99 crores as unaccounted long term capital gain, the ld. DRP recorded that the assessee executed power of attorney in favour of Kamlesh J Patel, which was notarized before the Notary Public at 26 Cameron Road, London (U.K.) on 26/07/2016 which bears the passport number and remarks and signed before him. On recording such fact, the ld. DRP noted that the assessee has accepted the power of attorney was not apparently present before the Notary Public, otherwise notary public would not have appended his remark on the document. In a natural corollary when document is unsigned by one of the party, the party accepting the power of attorney can dispatch from London for accepting by the said party (attorney holder), it cannot be ruled out that Banakhat prepared and unsigned by one of the party. The ld. DRP while discarding the contention of assessee about execution of Banakhat and in discarding the affidavit made their finding in the following manner: “6.15 At the outset, the assessee has contended that the banakhat prepared on 11.07.2016 was prepared fraudulently by the Directors and Officials of the Company since he was not in India on the date of execution of Banakhat. We have examined the claim of the assessee. In this regard we have observed that the assessee has executed a Power of Attorney in favour of Sh. Kamlesh H Patel which was notarized before the Notary Public at 26, Cameron Road London, England, UK on '26 JULY 2016', which shows a remark "SIGNED BEFORE ME HIREN JASUBHAI PATEL UK PASSPORT 109904032". It therefore emerges from the document that Sh. Kamleshbhai Haribhai Patel who accepted the power of attorney was apparently not present before the Notary Public, otherwise the notary public would not have appended this remark on the document. As a IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 17 natural corollary when a document unsigned by one of the party i.e. the party accepting the power of attorney, can be dispatched from London for acceptance by the said party, it cannot be ruled out that the 'Banakhat' prepared and unsigned by one of the party i.e., the assessee, was dispatched to him at his London address for his signature and sent back to India after his signature later. And if it is assumed that Sh. Kamleshbhai Haribhai Patel was present before the Notary Public on '26 JULY 2016' for accepting the Power of Attorney, then it cannot be ruled but that he carried with him the banakhat prepared on 11.07.2016 for his signature. Since this document is not notarized, it is inconsequential when he signs the document as long as it serves the purpose for which the document is prepared, it is well known practice that the cash component of such deals are settled before signing of any of the legal documents for transfer of property to avoid litigation.” 13. On the discrepancy in the Banakhat, the ld. DRP held that they have verified the signature of assessee on power of attorney executed by assessee in favour of Kamlesh Patel as well as sale deed and there is no mismatch in such signatures. The ld. DRP also compared the signature of Vijaykumar J Panchal on Banakhat as well as on sale deed and noted that in Banakhat he has put signature in initial, however, on sale deed, he had signed in his full name. On comparing such signature, the ld. DRP recorded that the discrepancies pointed out by the assessee is of little significance when totality of fact is taken into account. On the discrepancies about the reference of six cheques, out of which four cheques of Rs. 8.00 lacs each and two cheques of Rs. 9.00 lacs each aggregating Rs. 50.00 lacs which was not received by assessee. The ld. DRP held that by referring the answer to question No. 13 and 14 held IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 18 that the sale consideration of Rs. 2.15 crores were as per the sale deed and Rs. 11.99 crores were paid over and above. Thus, such amount cannot be expected to be reflected in the sale deed. On the objection of validity of Banakhat, the ld. DRP gave the following findings: “6.27 The assessee has next argued that the Banakhat is void ab-initio on the ground that Sh. Kamlesh J. Patel, mentioned as Joint Seller of the land in the document is not the owner of the property, the owner of the land was only assessee. We have considered the submission of the assessee and find that the arguments advanced by the assessee is fallacious. We have noted that nowhere in this document Kamlesh J. Patel is referred as the owner of property. In the initial paragraph on Page 2 of the Banakhat, he is referred as The Second Party' and on Page 3 of the banakhat it is stated that 'The ownership and possession of the above mentioned land is with The Second Party' of this agreement, without specifying who is the owner and who has the possession of the land. We may note that in practice, it is not uncommon to incorporate the names of the consenting party viz. the party having some right to the property or who are in the possession of the land and otherwise enjoy some right to the property, in such agreements. We also find the arguments advanced by the assessee that the assessee has given power of attorney to Sh. Kamlesh H. Patel on 06.09.2016 which was notarized in London, UK on 20.07.2006 and that the Banakhat was executed on 11.07.2016 much before the power of attorney was given to Sh. Kamlesh H. Patel, of no consequence as Sh. Kamlesh Patel has signed the Banakhat in his own capacity as an individual not as power of attorney for the assessee. Under the circumstances, the onus was on the assessee to explain this transaction as per Section 114 of the Indian Evidence Act 1872.” 14. On the plea of cross examination of Vijay Panchal, Dhruv Agarwal and Dhirendra Singh raised by assessee, the ld DRP held that the Assessing IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 19 Officer completed the assessment on the basis of statement of Paresh Thakkar and the documents found during the course of survey. The assessee has not demanded cross examination of Paresh Thakkar, therefore, they did not find any merit in the plea of cross examination of Vijay Panchal, Dhruv Agarwal and Dhirendra Singh and rejected the contention of assessee and upheld the action of Assessing Officer in making addition of long term capital gain of Rs. 2.11 crores as well as undisclosed long term capital gain of Rs. 11.99 crores. 15. On receipt of direction of ld. DRP dated 29/09/2022, the Assessing officer passed final assessment order on 20/01/2023 under Section 147 r.w.s. 144C(13) of the Act by making addition of long term capital gain of Rs. 2.11 crores as well as undisclosed long term capital gain of Rs. 11.99 crores. Aggrieved by the additions in the assessment order made in pursuance of direction of ld. DRP, the assessee has filed present appeal before this Tribunal. 16. We have heard the submissions of ld. AR of the assessee and the ld. CIT-DR for the revenue. The ld AR for the assessee submits that the assessee is NRI, during the relevant financial year under consideration he sold his agricultural land to Manpasand Beverages at Rs. 2.15 Crore. The impugned land was purely rural agricultural land and cannot be treated as capital asset as per the definition under Section 2(14)(iii) of the Act. To support his plea, the assessee furnished certificate of Talati IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 20 to substantiate that land was used for agricultural purpose and distance from any nearby local authority is beyond 8 KM and the population of nearby local authority is below 10000, copy of Google Map distance and Census data available online was also furnished. The land was being used for agriculture purpose. Till the date of execution of sale deed of land, the nature of land was not converted from agriculture to non- agriculture. Merely the land was sold to non-agriculturist, its nature and character on the date of transfer was not changed. In the sale deed the nature of land is clearly mentioned as agriculture land. The land was purchased by company, still its nature on the date of sale was of agriculture. Mere purchase of land by non-agriculturist will not ipso facto change the character of land in the hand of assessee. To support his submissions, the ld AR for the assessee relied on the following case laws;  CIT Vs Rajshibhai Meramanbhai Odedra (2014) 42 taxmann.com 497 (Guj),  CIT Vs Cochin Malabar Estate & Industries (2022) 134 taxmann.com 162 (Kerala),  PCIT Vs Heeraben Bhadresh Mehta ( (2018) 96 taxmann.com 164 (Guj),  Ramji Bhai P Chaudhary Vs DCIT (2010) 124 ITD-1 (Ahd),  CIT Vs P. Mahalakshmi (2020) 121 taxmann.com 77 (Mad),  Suresh Dulabhai Vs ITO (2021) 127 taxman.com 147 (Surat-Tribunal),  Hiten Tulshibhai Engineer Vs ITO (2023) 157 taxmann.com 82 (Ahd-Trib) 17. The ld AR for the assessee by refereeing the relevant part of the aforesaid decisions would submits that in case, the contention of the assessee that the land sold by the assessee is rural agriculture land and is not capital asset within in the definition of section 2(14)(iii) of the Act IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 21 is allowed, all other grounds of appeal and his submissions will become academic and needs no further adjudication. 18. On the other addition of Rs. 11.99 crores of undisclosed long term capital gain, the ld AR for the assessee submits that the assessee filed his affidavit/declaration that he has not signed any Banakhat nor it bear his signature. The assessee has not given any power to anyone to execute such Banakhat, he was not in India on the date of execution of Banakhat, copy of his passport is filed. The assessee stated that ITO(IT), Surat provided copy of such Banakhat to assessee only on 16/11/2022. No other documents were provided to the assessee despite his request through e-mail to ITO. The assessee has seen Banakhat for the first time at the time of making his submission before the ld. DRP. The ld AR for the assessee submits that the document is invalid and having its effect as void ab initio. The name of Kamlesh J Patel is mentioned as joint seller of the land he has no authority or attorney on behalf of assessee. Banakhat is not a valid document which was a result of fraudulent act and fake document. The assessee has already filed complaint with police officials. The ld AR for the assessee submits that as per details on Banakhat, six cheques out of four cheques of Rs. 8.00 lacs each and two cheques of Rs. 9.00 lacs each aggregating to Rs. 50.00 lacs to the assessee against the advance of sale of land, are mentioned in the said banakhat, none of the cheques were received by IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 22 assessee or cleared in bank account of assessee and none of the cheques were matching with the cheque mentioned in the sale deed. During the hearing before DRP, the assessee made prayer for providing the other documents on which the Assessing Officer relied and as per direction in the virtual hearing before DRP on 22/11/2022, the Assessing Officer has provided copy of voucher of cash payment, copy of statement of Paresh Thakkar and some additional documents received through e-mail. The assessee received copy of power of attorney dated 16/09/2022, list/inventory of books of account found and impounded during the survey on Manpasand Beverages Ltd. on 14/11/2019 and bank statement. The assessee filed his detailed explanation in his submission dated 02/12/2022 about the alleged Banakhat as well as transactions recorded therein. No payment shown in the Banakhat was received by assessee. The assessee also disputed the cash payment shown in the voucher found during the survey action in Manpasand Beverages Ltd.. The ld AR for the assessee submits that in answer of question No. 15 of Paresh Thakkar explained that whole transactions of sale of land was planned and executed by Vijay Panchal, Dhruv Agarwal and Dhirendra Singh. The assessee asked to allow cross examination of Vijay Panchal, Dhruv Agarwal and Dhirendra Singh. But their cross examination was not allowed. The DRP rejected the request (objection) of assessee by taking view that the assessing officer made IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 23 addition on the basis of statement of Paresh Thakkar and not of Vijay Panchal, Dhruv Agarwal and Dhirendra Singh. As per statement of Paresh Thakkar, the transaction of land was carried out by Vijay Panchal, Dhruv Agarwal and Dhirendra Singh, thus, they were crucial witnesses. So in absence of cross examination of such persons who were indulging in making the alleged payment no addition is sustainable. The ld AR for the assessee again submits that in case the land is held and rural agriculture land, all his submissions will become academic. 19. On the other hand, the ld CIT-DR for the revenue supported the order of assessing officer and the directions of ld DRP. The ld CIT-DR for the revenue submits that the assessee is an NRI and residing in U.K. The assessee is having land at village-Manjusar, Taluka-Savli, District- Vadodara. The land of assessee is fall in GIDC area. The GIDC area is notified area. The assessee has not shown any agriculture income while filing return of income. The assessee while filing return of income has shown income from house property. A survey action was carried out in October, 2017 at Manpasand Beverages Ltd. During the survey action, incriminating material regarding cash payment against the land sold by assessee to Manpasand Beverages Ltd was found. Such cash payment was not shown in the regular books of account of Manpasand Beverages Ltd. Manpasand Beverages Ltd. purchased the land for expansion of IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 24 their industrial unit. The purchaser purchased the land for expansion of their industrial unit so the land purchased is a commercial land. Negotiation of said land was initiated through Kamlesh Patel who is power of attorney holder of assessee. Kamlesh Patel signed the Banakhat on behalf of assessee. If as per stand of assessee, the Banakhat was signed without any legal authority of assessee, why the assessee has not taken any legal action against such person for forging such document. The document cannot be accepted in part. Statement of Kamlesh Patel was recorded by the Investigation team and who admitted about the said transactions. Statement of Paresh Thakkar, C.F.O. of Manpasand Beverages Ltd. was also recorded by the Investigation Wing who clearly described the entire transaction ad modus operandi of cash payment made to the assessee. So far as nature of land is concerned, the nature of land cannot be determined on the sole basis of its entry in the revenue record. The assessee has not proved that the land was used for agriculture purpose as no agriculture income is shown in the return of income. The ld. CIT-DR for the revenue submits that admittedly, soon after transfer of land to Manpasand Beverages Ltd., the use of agriculture land was converted into non-agriculture land as the sale deed of said land was conditional. Such transaction of land is an adventure in nature of trade as the land was purchased by purchaser for industrial use. To support his IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 25 submission, the ld. CIT-DR for the revenue relied upon the decision of Rajkot Bench of Tribunal in Naresh Kantilal Thacker Vs ITO dated 06/01/2023 and the decision of Bangalore Tribunal in Shri Kamanahalli Pilla Reddy Nagesh Vs ITO in ITA No. 1396/Bang/2019 order dated 21/06/2022. 20. The ld. CIT-DR for the revenue submits that he has also searched on website of Gujarat State Government and find that village-Manjusar is a part of GIDC, copy of such notified area is placed on record to appreciate the fact in proper perspective. The ld. CIT-DR for the revenue further submits that the Hon'ble Supreme Court in case of Sarifabibi Mohammed Ibrahim Vs CIT (supra) has discussed the various factors determining the nature of land for the purpose of definition of Section 2(14)(iii) of the Act. The decision of Hon'ble Supreme Court in Sarifabibi Mohammed Ibrahim Vs CIT (supra) is squarely applicable on the facts of the present case. The ld. CIT-DR for the revenue submit that the Assessing Officer as well as ld. DRP considered all such facts and rejected all the plea of assessee that the impugned land is not a rural agricultural land, therefore, the addition on account of long term capital gain of Rs. 2.13 crores may be upheld. 21. On the addition of undisclosed long term capital gain of Rs. 11.99 crores, the ld. CIT-DR for the revenue submits that the officials of Manpasand Beverages Ltd. in their statement, which is duly supported IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 26 by corroborative evidence in the form of narration of payment on various dates, clearly proved that the assessee has received additional amount in addition to the sale consideration shown in the sale deed. The assessee is merely denying receipt of cash payment. It is a known fact that the sale consideration of land is always more than the consideration shown on the registered document. Thus, the lower authorities rightly brought such additional cash payment to tax as undisclosed long term capital gain. 22. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities carefully. We have also deliberated on the case laws relied upon by both the parties. We find that the nature of land in the registered sale deed is recorded as agriculture land. Thus, till the date of transfer of registration of sale deed of land its nature and character was not changed. Though, it was a condition mentioned in the registered sale deed that the purchaser will get the conversion of land use as NA land as per the statutory requirement of Land Tenancy Act. The objection of the assessing officer is that the land was purchase by non-agriculturist that is by a Company for expansion of their industrial unit and ultimately its land use was changed. 23. We find that Jurisdictional High Court in CIT Vs Rajshibhai Meramanbhai Odedra (supra) held that merely agriculture land was sold in favour of IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 27 non-agriculturist in breach of law prevailing in State, the said land would not lose its character as agriculture land and hence, could not be treated as capital asset. We further find that jurisdictional High Court in PCIT Vs Heenaben Bhadersh Mehta (supra) also held that where the assessee was an agriculturist and land owned by him had been shown as agricultural land in revenue records, mere fact that said land had been sold to an industrial unit and had potential to be used for industrial purpose, could not be a determinative factor to treat profit earned by assessee on sale of agriculture land as business income. Further we find that our same combination of this bench in Suresh Dhulabhai Patel Vs ITO (supra) also held that where assessee an agriculturist, sold land on which agricultural operations were being carried out for many years and from certificate of collector it was evident that till date of sale, assessee`s land was an agricultural land and was not a capital asset, Assessing Officer was to be directed to treat said land as an agricultural land. In a recent decision the coordinate bench of Ahmedabad Tribunal on identical facts and contentions of the parties in Hiten Tulshibhai Engineer Vs ITO (2023) 157 taxmann.com 82 (Ahd-Trib) also held that where though purchaser company bought agricultural land from assessee for bona fide industrial purposes, however, he had obtained certificate for change of land use from agriculture to non-agriculture only after purchase of land from assessee and conveyance deed all IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 28 along mentioned impugned land of assessee as agricultural land, said land could not be treated as a 'capital asset' in hands of assessee and capital gains earned upon its sale by assessee to company could not be taxed. 24. The ld CIT-DR for the revenue for the first time raised plea that the impugned land is part of Savli and situated in the notified area of Gujarat Industrial Development Corporation (GIDC). Firstly, such objection of ld CIT-DR for the revenue is not sustainable as he cannot improve the case of assessing officer or DRP, as no such plea/ objections was raised by the lower authorities. Secondly, by merely declaring any area as notified industrial area for the purpose of industrialisation will not make such area as a part of Municipality, Municipal Corporation, notified area committee, town area committee or Cantonment board unless such area is setup by invoking the provisions of Article 243 Q of Indian Constitution. 25. The Hon'ble Supreme Court in the case of Saij Gram Panchayat v. State of Gujarat (supra) while considering the scope of section 16 of GIDA and section 264A inserted in Gujarat Municipalities Act, in view of insertion of Part IXA in the Constitution held that industrial area under the GIDA would be a notified area under new section 264A of Gujarat Municipalities Act and would mean an 'industrial township area' under the proviso to clause (1) of Article 234-Q of the Constitution of India IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 29 (Para-10).It was further held that GIDA operates in a different sphere from Part IX and IXA of the Constitution as well as Gujarat Panchayat Act. The latter being provision dealing with local self-government, while former being an Act of Industrial Development and orderly establishment an organization and industries in a State. The Industrial Areas which have been notified under section 16 of the GIDA. These industrial areas have been developed by the Gujarat Industrial Development Corporation (GIDC) and they can hardly be looked upon as rural areas covered by Part IX of the Constitution. It is only such industrial areas which can be notified under section 16 of the Gujarat Industrial Development Act, 1963. If by a notification issued under section 16, these industrial areas are deemed to be notified areas under the Gujarat Municipalities Act and are equated with industrial townships under the proviso to clause (1) of Article 243Q, the constitutional scheme is not violated. It was further held that under Chapter 3 of the Gujarat Industrial Development Act, 1962, the Gujarat Industrial Development Corporation, has been given power, inter alia, to develop land for the purpose of facilitating the location of industries and commercial centres. It has also been given the power to provide amenities and common facilities in such areas including provision of roads, lighting, water supply, drainage facilities and so on. It may do this either jointly with Government or local authorities or on an agency IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 30 basis in furtherance of the purposes for which the corporation is established. The industrial area thus has separate provision for municipal services being provided by the Industrial Development Corporation. Once such an area is a deemed notified area under the Gujarat Municipalities Act, 1964, it is equated with an industrial township under Part IXA of the Constitution, where municipal services may be provided by industries. It was further held that unless, it qualifies with the criteria prescribed under Article 243-Q of Constitution of India cannot be at par with municipality. Article 243-Q constitute three types of municipalities viz (i) Nagar Panchayat (ii) a Municipal council and (iii) Municipal Corporation, it provides that a municipality under clause (1) may not be constituted under certain circumstances. In respect of any three types of areas, set out in clause (1) of Article 243-Q, having regard to the size of area, the municipal services being provided or proposed to be provided by the industrial establishment in that area and such other factor as the Governor will deem fit to consider, he may by public notification, specifies such area to be an industrial township. 26. Further, Hon'ble Supreme Court in Solapur MIDC Industries Association Etc. Vs State of Maharashtra & Ors., JT (1996) 7 SCC 14 held that Municipal Corporation Act and an Industrial Development Act have distinct fields of operation and there is no inter se conflict between the IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 31 two. The aforesaid view as mention in para-25 and this para was also taken by this combination in Ambaben Jamubhai Patel Vs ITO in ITA No. 3021/Ahd/2014 dated 13.04.2022. 27. The ld CIT-DR for the revenue while making his submissions relied on the decisions in Naresh Kantilala Thacker Vs ITO (supra) and on Kamanahalli Pilla Reddy Vs ITO (supra). The ratio of decision in both the cases are not applicable on the facts of this case. In Naresh Kantilala Thacker Vs ITO (supra) the land was transferred after conversion of its land use from agriculture use to non-agriculture use and claimed capital gain. In Kamanahalli Pilla Reddy Vs ITO (supra) the appeal of that assessee was decided in his favour on the basis of decision of co-owner wherein it was held that they are not liable for capital gain being an agriculture land. So far as reliance in case of Sarifabibi Mohammed Ibrahim Vs CIT (supra) is concerned, we find that the land of that assessee was situated in the heart of Surat City. And so far the test prescribed by Hon’ble Court is concerned, we find that on going through all thirteen tests, the weight of tests is favoring the assessee instead of revenue. Considering the aforesaid factual and legal discussions, we can easily conclude the land sold by the assessee on the date of sale was not capital asset being rural agriculture land in the hand of assessee and the gain earned on sale of such land is not taxable. In the result, the ground No. 5 to 7 raised by the assessee are allowed. IT(IT)A No. 01/Srt/2023 Hiren Jasubhai Patel Vs ITO(IT) 32 28. Further considering the submissions of ld AR for the assessee that if the grounds no. 5 to 7 are allowed in favour of assessee, reaming grounds of appeal would become academic. Thus, all remaining grounds of appeal are treated as academic being infructuous. 29. In the result, the appeal of the assessee is partly allowed. Order announced in open court on 11 th March, 2024. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 11/03/2024 *Ranjan Copy to: 1. Assessee 2. Revenue 3. CIT 4. DR By order 5. Guard File Sr. Private Secretary, ITAT, Surat