Appeal Details
Counselvise Citation
[2016] 122 COUNSELVISE.COM (IT) 2780 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 year(s) 10 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
16-12-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
01-12-2016
Assessment Year
2008-2009
Appeal Filed On
01-02-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER IT(SS)A NOS. 8, 9, 20 & 21/AHD/2012 (ASSESSMENT YEAR:2008-09 & 2009-10) LATE SHRI GANDABHAI A MAKWANA THROUGH L.H. SHRI SENDHABHAI G MAKWANA, MAHADEV VAS, AT & POST ADALAJ, DIST. GANDHINAGAR APPELLANT VS. THE DY. CIT, CENT. CIR. -1(3), AAYKAR BHAVAN, NAVRANGPURA, AHMEDABAD RESPONDENT/ C ROSS APPELLANT PAN: BALPM7617K & IT(SS)A NOS. 19/AHD/2012 (ASSESSMENT YEAR:2008-09) ASSTT.CIT, CENTRAL CIRCLE 1(3), ROOM NO.304, 3 RD FLOOR, AAYKAR BHAVAN, NAVRANGPURA, AHMEDABAD APPELLANT VS. RANJIT V. MAKWANA, MAHADEV VAS, AT & POST: ADALAJ, GANDHINAGAR, PIN CODE: 382421 RESPONDENT PAN: BACPM7842M IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 2 - & IT(SS)A NOS. 22/AHD/2012 (ASSESSMENT YEAR:2008-09) ASSTT.CIT, CENTRAL CIRCLE 1(3), ROOM NO.304, 3 RD FLOOR, AAYKAR BHAVAN, NAVRANGPURA, AHMEDABAD APPELLANT VS. SENDHABHAI G MAKWANA, MAHADEV VAS, AT & POST: ADALAJ, GANDHINAGAR, PIN CODE: 382421 RESPONDENT PAN: BACPM7841J / BY ASSESSEE : SHRI ANKIT TALSANIA, A.R. / BY REVENUE : SHRI R. I. PATEL, CIT. D.R. /DATE OF HEARING : 01.12.2016 /DATE OF PRONOUNCEMENT : 16.12.2016 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS IS A SET OF SIX APPEALS. IT PERTAINS TO THREE DIFFERENT ASSESSEES NAMELY SHRI GANDABHAI A. MAKWANA (SINCE DECEASED), HIS SON / LEGAL HEIR AS WELL AS SECOND ASSESSEE SHRI SENDABHAI G MAKWANA AN D THE THIRD ASSESSEE SHRI RANJIT MAKWANA. THESE APPEALS RELATE TO ASSES SMENT YEARS 2008-09 & 2009-10. THEY ARISE FROM CIT(A)-III, AHMEDABADS COMMON ORDER PASSED IN CASE NOS. CIT(A)-III/90 TO 95/CC-I(3)/11-12 DATE D 15.11.2011 IN IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 3 - PROCEEDINGS U/S.143 (3) R.W.S. 153A(1)(B) R.W.S. 15 3B(1)(B) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. FORMER ASSESSMENT YEAR 2008-09 INVOLVES FOUR CAS ES. SHRI SENDABHAI HAS FILED IT(SS)A NO.8/AHD/2012 IN THE CAPACITY OF HIS FATHER/DECEASED ASSESSEE SHRI GANDABHAIS LEGAL HEIR. THIS IS FOLL OWED BY REVENUES TWO APPEALS IT(SS)A NO.20 & 22/AHD/2012 IN CASE OF THE ABOVE DECEASED ASSESSEE AND SHRI SENDABHAI HIMSELF. THIS IS FOLLO WED BY REVENUES YET ANOTHER APPEAL IT(SS)A NO.19/AHD/2012 FILED IN CASE OF THE LAST ASSESSEE SHRI RANJIT MAKWANA. 3. WE COME TO LATTER ASSESSMENT YEAR 2009-10 INVOLV ING CROSS APPEALS IN CASE OF SHRI GANDABHAI THROUGH HIS LEGAL HEIR SHRI SENDABHAI HEREINABOVE AND REVENUES APPEAL IT(SS)A NOS.9 & 21/AHD/2012; R ESPECTIVELY. 4. WE NOW DEEM IT APPROPRIATE TO DEAL WITH THE RELE VANT PLEADINGS IN ALL THE ABOVE APPEALS. THE ASSESSEES APPEAL IT(SS)A N O.8/AHD/2012 RAISES A SOLITARY SUBSTANTIVE GROUND CHALLENGING UNEXPLAINED INVESTMENT ADDITION IN ASSETS OF RS.5.33LACS AS MADE BY BOTH ASSESSING AS WELL AS LOWER APPELLATE AUTHORITY. REVENUES APPEAL IT(SS)A NO.20/AHD/2012 SEEKS TO REVIVE THE ASSESSING OFFICERS ACTION IN ADDING A SUM OF RS.37 .31LACS ON ACCOUNT OF ASSESSEE SHRI GANDABHAIS UNEXPLAINED INVESTMENT MA DE IN LIC, HOUSE AND TEMPLE CONSTRUCTION AND MONTHLY INCOME SCHEMES AS D ELETED TO THE TUNE OF RS.31.98LACS IN COURSE OF THE LOWER APPELLANT PROCE EDINGS. ITS NEXT APPEAL IT(SS)A NO.22/AHD/2012 ONCE AGAIN RAISES SOLE SUBST ANTIVE GROUND IN CHALLENGING THE LOWER APPELLATE ORDER DIRECTING THE ASSESSING OFFICER TO DELETE UNEXPLAINED INVESTMENT OF RS.35,15,280/- AS MADE IN THE ABOVE THREE KINDS OF INSTRUMENTS. THE REVENUES LAST APPEAL IN THIS ASSESSMENT YEAR IT(SS)A NO.19/AHD/2012 IN CASE OF SHRI RANJIT MAKWA NA ALSO PLEADS THAT IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 4 - THE CIT(A) HAS WRONGLY DELETED UNEXPLAINED INVESTME NTS OF RS.35,37,220/- AS MADE IN ABOVE THREE CATEGORIES. 5. WE HAVE ALREADY NARRATED THAT THE LATTER ASSESSM ENT YEAR INVOLVES TWO APPEALS. SHRI SENDHABHAI FILES IT(SS)A NO.9/AHD/20 12 RAISING THREE SUBSTANTIVE GROUNDS IN CHALLENGING THE CIT(A)S ORD ER CONFIRMING UNEXPLAINED INVESTMENT ADDITION OF RS.23,23,950/- I N VARIOUS ASSETS ON THE GROUND THAT THE SAME DO NOT HAVE ANY NEXUS WITH THE SALE CONSIDERATION OF THE LAND SOLD. HIS SECOND SUBSTANTIVE GROUND ASSAILS C ORRECTNESS OF THE LOWER APPELLATE ORDER SETTING ASIDE CAPITAL ASSET ISSUE P ERTAINING TO ASSESSEES AGRICULTURAL LAND SOLD THEREBY DIRECTING THE ASSESS ING OFFICER TO DECIDE IT AFRESH AFTER VERIFYING ITS DISTANCE FROM AHMEDABAD AND GANDHINAGAR MUNICIPALITIES INSPITE OF THE ALLEGED FACT THAT TH E SAME IS WELL BEYOND A DISTANCE OF AT LEAST 9 KILOMETERS THEREFROM. THIRD AND LAST SUBSTANTIVE GROUND AVERS THAT THE CIT(A) HAS FURTHER ERRED IN HOLDING THAT IF ASSESSEES ABOVE LAND SOLD IS NOT FOUND TO BE A CAPITAL ASSET BEING SITUATED BEYOND A DISTANCE OF EIGHT AND FOUR KILOMETERS FORM THE ABOVE TWO MUNICI PALITIES, THE ADVANCE AMOUNT OF RS.7LACS BEING FORFEITED AT HIS BEHEST WO ULD BE LIABLE TO BE TAXED U/S.5 OF THE ACT. 6. THIS FOLLOWS REVENUES CROSS APPEAL IT(SS)A NO.2 1/AHD/2012. IT RAISES FOUR SUBSTANTIVE GROUNDS INTER ALIA PLEADING THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING UNEXPLAINED CASH AD DITION OF RS.1.5LACS, IN DIRECTING THE ASSESSING OFFICER TO VERIFY WHETHER T HE ASSESSEES LANDS DISTANCE FROM THE ABOVE TOW MUNICIPALITIES IN ORDER TO DECIDE AS IF THE SAME IS A CAPITAL ASSET U/S.2(14) OR NOT GIVING RISE TO CAP ITAL GAINS, IN DIRECTING THE ASSESSING OFFICER TO DELETE ADDITION OF RS.57,28,35 0/- MADE ON ACCOUNT OF CASH PAYMENT FOR CANCELLATION OF SALE DEED WITH SHR I HEMENDRA SHAH AND IN FURTHER APPLYING PROVISION OF SECTION 51 OF THE AC T FOR THE COST OF ACQUISITION IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 5 - OF LAND ALLEGEDLY AFTER IGNORING THE FACT THAT THE ASSESSEE HAS EARNED RS.7LACS AS FORFEITED MONEY IN THE NATURE OF NON REFUNDABLE SUM; RESPECTIVELY. 7. BOTH THE LD. REPRESENTATIVES STATE AT THE OUTSET THAT THE MAIN SUBSTANTIVE ISSUE IN THE INSTANT APPEALS IS THAT OF NATURE OF S HRI GANDABHAIS AGRICULTURAL LANDS COMPRISED IN BLOCK NO.648, VILL. ADALAJ, DIST . GANDHINAGAR. THEY SUBMIT THAT THE ASSESSING OFFICER HAD TREATED THIS TRACT OF LAND AS A CAPITAL ASSET U/S.2(14)(III)(B) OF THE ACT. THE CIT(A) HAS REMITTED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO VERIFY THE ABOVE L ANDS DISTANCE FROM AHMEDABAD AND GANDHINAGAR MUNICIPALITIES AS TO WHET HER THE SAME COMES WITHIN A DISTANCE OF 8 OR 4 KILOMETERS; RESPECTIVEL Y OR NOT. WE THUS PROCEED TO DECIDE THIS MAIN ISSUE FIRST IN THE SUCCEEDING P ARAGRAPHS. WE TAKE UP ASSESSMENT YEAR 2009-10 INVOLVING ASSESSEES AND RE VENUES RESPECTIVE CROSS APPEALS IT(SS)A NOS. 9 & 21/AHD/2012 AS THE LEAD CA SES. 8. THERE DOES NOT APPEAR TO BE ANY DISPUTE THAT ALL THESE THREE ASSESSEES ARE ASSESSED AS INDIVIDUALS. THE ABOVE DECEASED AS SESSEE SHRI GANDABHAI WAS OWNER IN POSSESSION OF THE AGRICULTURAL LAND CO MPRISED IN BLOCK NO.648, VILL. ADALAJ, DIST. GANDHINAGAR. HE SOLD THE SAME ON 11.08.2008 FOR RS.2.1CRORES COMPRISING OF CHEQUE PAYMENT OF RS.53, 51,519/- AND THE REMAINING SUM INVOLVED CASH COMPONENT. THIS CASE F ILE INDICATES THAT THERE HAS BEEN A LOT OF ISSUE BETWEEN THE PARTIES ABOUT A UTHENTICITY OF ASSESSEES CLAIM OF HAVING RECEIVED THE ABOVE CASH PAYMENT IN VIEW OF THE FACT THAT HIS VENDEES HAD DENIED THE SAME IN THEIR RESPECTIVE DEP OSITIONS. IT IS FURTHER EVIDENT TO US THAT THE ASSESSING OFFICER HAS HIMSEL F ASSESSED THE ABOVE GROSS SUM OF RS.2.1 CRORES FOR THE PURPOSE OF COMPUTING CAPITAL GAINS. HE HOWEVER ADOPTED A DIFFERENT STAND WHILST DEALING WI TH ASSESSEES EXPLANATION REGARDING SOURCE OF THEIR INVESTMENTS I N THE ABOVE ASSETS CATEGORIES ON THE GROUND THAT PURCHASERS/VENDEES HA D NOT SUPPORTED THE CASH IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 6 - COMPONENT VERSION. THE CIT(A)S ORDER UNDER CHALLE NGE OBSERVES THAT SUCH A CONFLICTING APPROACH IS NOT PERMISSIBLE. HE HOLDS THAT THE ASSESSEE HAD AMPLY PROVED TO HAVE RECEIVED TOTAL SALE CONSIDERATION OF RS.2.1 CRORES. THE REVENUES SUBSTANTIVE GROUND NARRATED HEREINABOVE N OWHERE CHALLENGE THIS CLINCHING FINDING. WE THUS INFER THAT THE ASSESSEE HAD IN FACT RECEIVED THE ABOVE GROSS SALE CONSIDERATION OF RS.2.1CRORES IN L IEU OF PARTING WITH HIS TITLE OF HIS LAND SOLD. 9. A PERUSAL OF THESE CASE FILES REVEALS THAT THE D EPARTMENT CARRIED OUT A SEARCH IN SHRI GANDABHAIS CASE ON 15.10.2008. IT WOULD COME ACROSS VARIOUS DOCUMENTS PERTAINING TO PURCHASE OF HIS AGR ICULTURAL LANDS, A CANCELLATION DEED BETWEEN SHRI GANDABHAI AND SHRI H EMENDRA SHAH ALONGWITH OTHER EVIDENCE INDICATING TOWARDS SUBSTAN TIAL INVESTMENTS MADE IN LIC POLICIES, CONSTRUCTION OF HOUSES/TEMPLES AND MO NTHLY INCOME SCHEMES IN THE NAME OF ALL THREE ASSESSEES. WE PAUSE FOR A MO MENT HERE TO CLARIFY THAT SHRI RANJIT V. MAKWANA IS SHRI GANDABHAIS NEPHEW. HE HAD SIGNED THE ABOVE SALE DEED IN CAPACITY OF A CONFIRMING PARTNER . THE DEPARTMENTAL AUTHORITIES INITIATED SECTION 153A PROCEEDINGS. SH RI GANDABHAI FILED HIS RETURN ON 31.03.2010 STATING INCOME OF RS.75012/-. PAGES 1 TO 6 OF THE PAPER BOOK CONTAIN A COPY THEREOF. IT IS EVIDENT THAT TH E ABOVE VENDOR ASSESSEE DID NOT INCLUDE THE ABOVE SALE CONSIDERATION IN HIS RET URN. HE WOULD HOWEVER APPEND A NOTE THERETO STATED TO HAVE SOLD THE IMPUG NED AGRICULTURAL LAND FOLLOWED BY HIS CLAIM THAT THE SAME WAS NOT A CAPIT AL ASSET SO AS TO GIVE RISE TO ANY CAPITAL GAINS. 10. THE ASSESSING OFFICER TOOK UP SCRUTINY. HE IS SUED A SHOW CAUSE NOTICE FOR TREATING THE ABOVE LAND SOLD AS A CAPITA L ASSET U/S.2(14) OF THE ACT. THE ASSESSEE FILED REPLY ON 06.09.2010. HE SUBMITT ED THAT THE LAND SOLD WAS PURELY AN AGRICULTURAL ONE. HIS CASE WAS THAT THE ENTIRE SALE CONSIDERATION OF IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 7 - RS.2.17CRORES (INCLUDING RS.7LACS FORFEITED AMOUNT) WAS EXEMPT AS THE LAND WAS WELL BEYOND A DISTANCE OF 8 & 4 KILOMETERS FROM AHMEDABAD AND GANDHINAGAR MUNICIPALITIES. THE ASSESSEE FURTHER PL EADED THAT HIS VILLAGE POPULATION WAS WELL LESS THAN 10,000 AS PER 2001 CE NSUS. HE ENCLOSED NECESSARY CERTIFICATE AS WELL. THE ASSESSEE WOULD THERAFTER PLACED ON RECORD GOVERNMENT OF INDIAS (FINANCE DEPARTMENT) NOTIFICA TION DATED 06.01.1994 ISSUED U/S.2(14)(III)(B) OF THE ACT SPECIFYING DIST ANCE LIMITS FROM AHMEDABAD AND GANDHINAGAR MUNICIPALITIES TO BE 8 & 4 KILOMETE RS; RESPECTIVELY. THE ASSESSEE ACCORDINGLY CLAIMED THAT THE ABOVE LAND SO LD WAS NOT A CAPITAL ASSET SO AS TO GIVE RISE TO CAPITAL GAINS AS PROPOSED IN ASSESSING OFFICERS SHOW CAUSE NOTICE. 11. WE PROCEED FURTHER TO FIND THAT THE ASSESSING O FFICER THEREAFTER INFORMED THE ASSESSEE THAT HIS LAND WAS WITHIN 8 KI LOMETERS FROM GOTA MUNICIPALITY AS MERGED WITH AHMEDABAD MUNICIPAL COR PORATION IN THE YEAR 2008. HE OPINED THAT ASSESSEES LAND ACCORDINGLY W AS A CAPITAL ASSET U/S.2(14) OF THE ACT AS THE ABOVE DISTANCE HAD TO B E TAKEN FROM ANY MUNICIPALITY AND NOT ONLY THE TWO STATED HEREINABOV E. HE THEREAFTER FRAMED THE IMPUGNED ASSESSMENT ON 29.10.2010 ON THESE VERY LINES TO CONCLUDE THAT THE ABOVE DISTANCE OF 8 KILOMETERS WOULD BE TAKEN F ROM GOTA MUNICIPALITY AS MERGED WITH THE AHMEDABAD MUNICIPAL CORPORATION. H E ACTED ACCORDINGLY TO COMPUTE THE IMPUGNED LONG TERM CAPITAL GAINS. 12. THE ASSESSEE PREFERRED AN APPEAL. THE CIT(A) D IRECTS THE ASSESSING OFFICER TO VERIFY ASSESSEES LANDS DISTANCE FROM AH MEDABAD AND GANDHINAGAR MUNICIPALITIES AND FIND OUT AS TO WHETHER THE SAME IS WITHIN 8 OR 4 KILOMETERS THEREFROM OR NOT AS UNDER: 8. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT. FIRST OF ALL, IT WOULD BE IMPORTANT TO ADJUDICATE WHETHER THE LAND IN QUESTIO N IS A CAPITAL ASSET OR NOT. IF IT IS NOT A CAPITAL ASSET, THEN THE SALE PROCEEDS THER EOF CANNOT BE TAXED UNDER SECTION 45 OF THE INCOME-TAX ACT UNDER THE HEAD OF CAPITAL GAINS. FOR THIS PURPOSE, IT IS IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 8 - NECESSARY TO REFER TO THE DEFINITION OF CAPITAL ASS ET AS MENTIONED IN SECTION 2 (14) (III) OF THE INCOME-TAX ACT. AS PER THIS DEFINITION , THE AGRICULTURAL LAND IS NOT A CAPITAL ASSET IF IT IS NOT SITUATED (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURIS DICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNI CIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A P OPULATION OF NOT LESS THAN TEN THOUSAND ACCORDING TO THE LAST PRECED ING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR; OR (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MOR E THAN EIGHT KILOMETERS, FROM THE LOCAL LIMITS OF ANY MUNICIPALI TY OR CANTONMENT BOARD REFERRED TO IN ITEM (A), AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANIZATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS, SPECIFY IN THIS BEHALF BY NOTIFICAT ION IN THE OFFICIAL GAZETTE 8.1. AS PER THE OFFICIAL SITE OF THE CENSUS INDIA 2 001, THE TOTAL POPULATION OF VILLAGE ADALAJ IN 2001 WAS 9776. THEREFORE, THE POP ULATION OF THE VILLAGE ADALAJ DOES NOT EXCEED 10,000 AS PER THE LAST CENSUS OF 20 01. THE CONDITION REGARDING THE POPULATION EXCEEDING 10,000 IS NOT SATISFIED IN THI S CASE. AS REGARDS THE NEXT CONDITION REGARDING THE DISTANCE FROM THE MUNICIPAL LIMIT, A CERTIFICATE WAS PRODUCED BY THE AR BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS PER WHICH THE DISTANCE FROM THE MUNICIPAL LIMIT OF GANDHINAGAR AND THE VILLAGE ADALAJ IS 9 KM. SIMILARLY A CERTIFICATE FROM THE VI LLAGE PANCHAYAT WAS PRODUCED BEFORE THE AO AS PER WHICH THE DISTANCE BETWEEN THE VILLAGE AND THE MUNICIPAL LIMIT OF AHMEDABAD IS 9 KM. IN OTHER WORDS, ACCORDI NG TO THE APPELLANT, THE LAND IN QUESTION IN VILLAGE ADALAJ IS NOT CAPITAL ASSET AS BOTH THE CONDITIONS OF POPULATION EXCEEDING 10,000 AND THE DISTANCE EXCEEDING 8 KM AR E APPLICABLE IN HIS CASE. HOWEVER, THE AO DID NOT BELIEVE THE CERTIFICATE PRO DUCED BY THE APPELLANT FROM THE VILLAGE PANCHAYAT AND HELD THAT SINCE THE DISTANCE FROM THE GOTA MUNICIPALITY TO VILLAGE ADALAJ IS LESS THAN 8 KM, THE AGRICULTURAL LAND IN QUESTION IS A CAPITAL ASSET. BEFORE ME ALSO THE AR RELIED UPON THE CERTIFICATES OF GRAM PANCHAYAT REGARDING THE DISTANCE FROM THEMUNICIPAL LIMIT OF AHMEDABAD A ND GANDHINAGAR FROM THE VILLAGE ADALAJ. IT WAS ALSO .CONTENDED BY THE AR TH AT SINCE THE LAND IS SITUATED AT VILLAGE ADALAJ WHICH FALLS UNDER THE JURISDICTION O F DISTRICT GANDHINAGAR, THE: DISTANCE FROM THE MUNICIPAL LIMIT OF GANDHINAGAR TO ADALAJ ONLY IS TO BE SEEN. IT WAS STATED THAT SINCE THE GOVERNMENT OF INDIA HAS N OTIFIED THE DISTANCE FROM THE MUNICIPAL LIMIT OF GANDHINAGAR AT 4 KMS AND THE DIS TANCE OF THE VILLAGE ADALAJ IS MORE THAN 4 KM FROM THE MUNICIPAL LIMIT OF GANDHINA GAR, THE LAND IN QUESTION IS NOT A CAPITAL ASSET. FOR THIS PURPOSE, RELIANCE WAS PLACED ON THE DECISION OF DC1T VS. CAPITAL LOCAL AREA BANK LTD (2009) 29 SOT 394 / 6 ITR (TRIB) 314 (AMRITSAR). 8.2. THE-PROVISIONS OF SECTION2 (14) (III) WERE-INS ERTED BY THE FINANCE ACT 1970. IN THE CIRCULAR HO. 45 DATED 02-09-1970, THE C.B.D. T HAS CLARIFIED THAT LAND WHICH ARE SITUATED IN A VILLAGE WITH POPULATION BELOW 100 00 AND ALSO BEYOND THE DISTANCE NOTIFIED BY THE CENTRAL GOVERNMENT FROM TH E LIMITS OF ANY SUCH IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 9 - MUNICIPALITY OR CANTONMENT BOARD; WILL NOT BE COVER ED UNDER THE DEFINITION OF CAPITAL ASSET. FOR THE SAKE OF BREVITY RELEVANT POR TION OF THE CIRCULAR IS REPRODUCED AS UNDER: '30. PRIOR TO THE AMENDMENT MADE BY THE FINANCE ACT , 1970, THE DEFINITION-OF THE TERM 'CAPITAL ASSET' IN SECTION 2(14) EXCLUDED FROM ITS SCOPE, INTER ALIA, AGRICULTURAL LAND IN INDIA. ACCORDINGLY, NO LIABILI TY TO TAX AROSE ON GAINS DERIVED FROM TRANSFER OF AGRICULTURAL LAND IN INDIA. THIS E XEMPTION OF AGRICULTURAL LAND FROM THE SCOPE OF LEVY OF TAX ON CAPITAL GAINS HAS A HISTORICAL ORIGIN AND IS NOT DUE TO ANY BAR IN THE CONSTITUTION ON THE COMPETENCE OF PARLIAMENT TO LEGISLATE FOR SUCH LEVY. AGRICULTURAL LAND SITUATED IN MUNICIPAL AND OTHER URBAN AREAS IS ESSENTIALLY SIMILAR TO NON-AGRICULTURAL LAND IN SUC H AREAS IN ITS POTENTIALITIES FOR USE DUE TO THE PROGRESS OF URBANISATION AND INDUSTR IALISATION. THE FINANCE ACT, 1970 HAS, ACCORDINGLY, AMENDED THE RELEVANT PROVISI ONS OF THE INCOME-TAX ACT SO AS TO BRING WITHIN THE SCOPE OF TAXATION CAPITAL GA INS ARISING FROM THE TRANSFER OF AGRICULTURAL LAND SITUATED IN CERTAIN AREAS. FOR TH IS PURPOSE, THE DEFINITION OF THE TERM 'CAPITAL ASSET' IN SECTION 2(14) HAS BEEN AMEN DED SO AS TO EXCLUDE FROM ITS SCOPE ONLY AGRICULTURAL LAND IN INDIA WHICH IS NOT SITUATE IN ANY AREA COMPRISED WITHIN THE JURISDICTION OF A MUNICIPALITY OR CANTON MENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND PERSONS AC CORDING TO THE LAST PRECEDING CENSUS FOR WHICH THE RELEVANT FIGURES HAVE BEEN PUB LISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR. THE CENTRAL-GOVERNMENT HAS BEEN AUTHORISED TO NOTIF Y IN THE OFFICIAL GAZETTE ANY AREA OUTSIDE THE LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD HAVING A POPULATION OF NOT LESS THAN TEN THOU SAND UP TO A MAXIMUM DISTANCE OF 8 KILOMETRES FROM SUCH LIMITS, FOR THE PURPOSES OF THIS PROVISION. SUCH NOTIFICATION WILL BE ISSUED BY THE. CENTRAL GOVERNM ENT, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANISATION OF SUCH AREA, ARID, WHEN ANY SUCH AREA IS NOTIFIED BY THE CENTRAL GOVERNMENT, AGRICULTURAL LAND SITUAT ED WITHIN SUCH AREA .WILL STAND INCLUDED WITHIN THE TERM 'CAPITAL ASSET' AGRICULTURAL LAND SITUATED IN RURAL AREAS, I.E., AREAS OUTSIDE ANY MUNICIPALITY OR CANTONMENT BOARD HAVING A POPULATION OF NOT LESS THAN TEN THOUSAND AND ALSO BEYOND THE DIST ANCE NOTIFIED BY THE CENTRAL GOVERNMENT FROM THE LIMITS OF ANY SUCH MUNICIPALITY OR CANTONMENT BOARD, WILL CONTINUE TO BE EXCLUDED FROM THE TERM 'CAPITAL ASSE T'. 8.3. IN MY OPINION, THE CIRCULAR WAS ISSUED BY THE CBDT EXPLAINING THE PROVISIONS OF THE AMENDMENTS MADE BY THE FINANCE ACT, 1970 IN THE DEFINITION OF CAPITAL ASSET UNDER SECTION 2(14) HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANIZATION OF RURAL AREAS. IF THAT AREA FALLS WITHIN THE PRESCRIB ED LIMIT OF THE DISTANCE FROM ANY MUNICIPALITY, IN THAT CASE ALSO, THE AGRICULTURAL L AND WILL BE TREATED AS CAPITAL ASSET. FOR EXAMPLE, AN AGRICULTURAL LAND IN DAHISAR (FALLING UNDER THE DISTRICT OF THANE, MAHARASHTRA) WHICH IS WITHIN 8 KM FROM THE M UNICIPAL LIMIT OF MUMBAI WILL BE TREATED A CAPITAL ASSET BECAUSE IT IS WITHI N 8 KM FROM THE MUNICIPAL LIMIT, OF MUMBAI. THE CONTENTION OF THE APPELLANT THAT SINCE THE AGRICULTURAL LAND FALLS UNDER THE JURISDICTION OF DISTRICT THANE WHICH IS M ORE THAN 20 KM AWAY FROM THE MUNICIPAL LIMITS OF THANE, THEREFORE, IT CANNOT BE TREATED AS CAPITAL ASSET, CANNOT BE ACCEPTED BY ME BECAUSE THE INTENTION OF THE LEGI SLATURES IS TO BRING SUCH LAND UNDER THE AMBIT OF TAXATION, IN THE VICINITY OF WHI CH THE URBANISATION HAS TAKEN PLACE. THEREFORE, IF THE AGRICULTURAL LAND IS WITHI N THE DISTANCE OF 8 KM FROM THE MUNICIPAL LIMIT OF MUMBAI, THEN ALSO THE LAND FALLI NG UNDER THE DISTRICT OF THANE WILL HAVE TO BE TREATED AS CAPITAL ASSET. IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 10 - 8.4. THE AO IS THEREFORE DIRECTED TO VERIFY THE ACTUAL D ISTANCE BETWEEN THE MUNICIPAL LIMIT OF AHMEDABAD OR THE MUNICIPAL LIMIT OF GANDHINAGAR (AS ON THE DATE OF THE SALE OF THE LAND) AND THE LAND SITUATED IN VILLAGE ADALAJ. IF IT IS WITHIN 8 KM FROM THE MUNICIPAL LIMIT OF AHMEDABAD OR WITHI N 4 KM FROM THE MUNICIPAL LIMIT OF GANDHINAGAR, THEN IT WOULD BE TREATED AS C APITAL ASSET. OTHERWISE, IT CANNOT BE TREATED AS CAPITAL ASSET. IF IT IS A CAPITAL ASSET, THEN ONLY THE SALE PROCEEDS THEREOF WILL BE SUBJECT TO CAPITAL GAINS. IF THE DISTANCE IS MORE THAN 8 KM FROM, THE MUNICIPAL LIMIT OF AHMEDABAD AND ALSO 4 K M FROM THE MUNICIPAL LIMIT OF GANDHINAGAR, THEN ONLY IT CANNOT BE TREATED AS A CA PITAL ASSET AND THE SALE OF THE AGRICULTURAL LAND CANNOT BE TAXED UNDER THE HEAD OF CAPITAL GAINS. THIS LEAVES BOTH PARTIES AGGRIEVED. 13. WE HAVE BOTH THE LEARNED REPRESENTATIVES. CASE FILE PERUSED. THERE IS NO DISPUTE AS INDICATED HEREINABOVE THAT ASSESSEES LAND SOLD IS SITUATED IN VILL. ADALAJ, DISTT. GANDHINAGAR. HE SUBMITS THAT THE ABOVE LAND IS ADMITTEDLY SITUATED AT LEAST AT A DISTANCE OF MORE THAN 8 AND 4 KILOMETERS FROM AHMEDABAD AND GANDHINAGAR MUNICIPALITIES. HE QUOTE S BEFORE US GOVERNMENTS NOTIFICATION DATED 06.01.1994 (SUPRA) STATED TO BE THE MOST CRUCIAL EVIDENCE TO CONTEND THAT DISTANCE BETWEEN H IS LAND AND THE ABOVE TWO MUNICIPALITIES IS TO BE SEEN AS ON THE SAID DATE AN D NOT IN VIEW OF THE SUBSEQUENT EVENTS. REVENUES ARGUMENT ON THE OTHER HAND SUPPORTS ASSESSING OFFICERS OPINION TAKING INTO ACCOUNT THE FACT THAT ASSESSEES LAND CAME WITHIN 8 KILOMETERS DISTANCE FROM GOTA MUNICIP ALITY WHICH STOOD MERGED WITH THE AHMEDABAD MUNICIPAL CORPORATION IN THE YEAR 2008 RELEVANT TO EXECUTION OF THE IMPUGNED SALE DEED. WE REPEAT AT THIS STAGE THAT THE CIT(A) HAS ADMITTEDLY SET ASIDE THE ISSUE BACK TO T HE ASSESSING OFFICER. WE FIND THE SAME TO BE NO MORE SUSTAINABLE AS PER NECE SSARY AMENDMENT CARRIED OUT IN SECTION 251(1)(A) OF THE ACT AS AMENDED W.E. F. 01.06.2001 VIDE FINANCE ACT, 2001 TAKING AWAY SUCH AN OPTION. WE T HUS SEE NO REASON TO CONCUR WITH THE CIT(A)S DIRECTIONS TO THE ASSESSIN G OFFICER IN PRINCIPLE. 14. WE FURTHER FIND THAT THE ABOVE NOTIFICATION DAT ED 06.01.1994 CONTAINS EXPLANATION 2 SPECIFICALLY STATING THAT REFERENCE T O VARIOUS MUNICIPALITIES IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 11 - THEREIN (INCLUDING AHMEDABAD AND GANDHINAGAR) IS TO THE LIMITS AS EXISTING ON THE DATE OF NOTIFICATION I.E. 06.01.1994. BOTH THE LEARNED REPRESENTATIVES AGREE THAT LIMITS OF THESE TWO MUNICIPALITIES REMAI N UNCHANGED UP TO THE YEAR 2008 WHICH SAW GOTA MUNICIPALITY MERGER WITH AHMEDA BAD MUNICIPAL CORPORATION. WE NOTICE IN THIS BACKDROP THAT A CO- ORDINATE BENCH OF THE TRIBUNAL IN ITO VS. AKASDEEP FIRMS PVT. LTD. ITA NO S. 2138 & 2564/AHD/2012 DECIDED ON 11.08.2015 TAKES INTO ACCO UNT THE VERY NOTIFICATION TO CONCLUDE THAT SUBSEQUENT MODIFICATI ON IN MUNICIPAL BOUNDARIES WOULD NOT ENLARGE SCOPE OF THE SAID NOTI FICATION. IT FURTHER HOLDS THAT DISTANCE OF THE LAND SOLD IS TO BE SEEN IN VIE W OF THE DATE MENTIONED IN THE ABOVE NOTIFICATION ONLY I.E. 06.01.1994. WE TH US FIND NO REASON TO AGREE WITH THE REVENUES ARGUMENT SUPPORTING ASSESSING OF FICERS STAND SINCE GOTA MUNICIPALITY HAS NOWHERE BEEN SPECIFICALLY MEN TIONED IN THE ABOVE NOTIFICATION. THE REVENUES STAND IS THEREFORE DEC LINED. 15. NEXT COMES ASSESSEES ARGUMENT THAT HIS LAND SO LD IS ADMITTEDLY WELL BEYOND A DISTANCE OF 8 & 4 KILOMETERS FROM AHMEDABA D AND GANDHINAGAR MUNICIPALITIES. WE FIND THAT HE DRAWS SUPPORT FROM TALATI CERTIFICATES TO THIS EFFECT. A PERUSAL THEREOF REVEALS THAT THE SAME IS WITHOUT ANY COGENT MATERIAL WHICH COULD FORM THE BASIS OF SUCH A DISTANCE MEASU REMENT. WE OBSERVE IN OTHER WORDS THAT THESE CERTIFICATES OUGHT TO HAVE B EEN ENCLOSED ALONG WITH THE NECESSARY REVENUE DOCUMENTATION AND OTHER RELEVANT MATERIAL PROVING THAT SURFACE DISTANCE BETWEEN THE LAND SOLD AND THE TWO MUNICIPALITIES WAS WELL BEYOND THE SPECIFIED DISTANCE OF 8 & 4 KILOMETERS. WE ARE OF THE OPINION IN THESE PECULIAR FACTS THAT THE CIT(A) HAS CHOSEN TO DIRECT THE ASSESSING OFFICER TO VERIFY THE DISTANCE IN QUESTION. WE HAVE ALREADY OPINED THAT THE SAME IS NOT PERMISSIBLE. WE HOWEVER ARE FURTHER OF THE VIEW THAT SINCE THERE IS NO ERROR ON MERITS IN THE LOWER APPELLATE DIRECTIONS, WE OURSEL VES ADOPT THE SAME APPROACH TO REMIT THE ISSUE BACK TO THE ASSESSING AUTHORITY TO VERIFY ASSESSEES LANDS IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 12 - DISTANCE VIS--VIS THE TWO MUNICIPALITIES HEREINABO VE AS IT EXISTED AS PER 1994 NOTIFICATION (SUPRA). NEEDLESS TO SAY, IF HE FINDS THE SAME TO BE SITUATED AT A DISTANCE OF LESS THAN 8 & 4 KILOMETERS FROM AHMEDAB AD OR GANDHINAGAR MUNICIPAL LIMITS, ASSESSEES LAND SOLD WOULD BE TRE ATED AS A CAPITAL ASSET U/S.2(14) OF THE ACT. WE ACCORDINGLY ACCEPT ASSESS EES SECOND SUBSTANTIVE GROUND IN ASSESSEES AS WELL AS REVENUES APPEAL FO R STATISTICAL PURPOSES AS INDICATED HEREINABOVE. 16. WE NOW MOVE ON TO ASSESSEES FIRST SUBSTANTIVE GROUND CHALLENGING BOTH THE LOWER AUTHORITIES ACTION IN ADDING UNEXPLA INED INVESTMENTS IN ASSETS OF RS.23,23,950/-. WE FIND THAT THE ABOVE AGGREGAT E FIGURE INVOLVES THE FOLLOWING HEADS: DATE NAME OF ASSET AMOUNT 05/04/2008 CONSTRUCTION OF HOUSE AND TEMPLE RS.1,00 ,000/- 05/04/2008 CONSTRUCTION OF HOUSE AND TEMPLE RS.2,00,000/- 05/04/2008 CONSTRUCTION OF HOUSE AND TEMPLE RS.1,50,000/- 26/05/2008 PURCHASE OF LAND RS.15,00,000/- 01/07/2008 CONSTRUCTION OF HOUSE AND TEMPLE RS.1,00,000/- 08/09/2008 STAMP EXPENSES KADI LAND RS.73,950/- 15/10/2008 BROKERAGE RS.2,00,000/- TOTAL RS.23,23,950/- 17. THE ASSESSEES CASE BEFORE THE ASSESSING OFFICE R WAS THAT ALL THESE INVESTMENTS CAME FROM THE ABOVE CASH COMPONENT OF R S.1.57 CRORES. THE ASSESSING OFFICER DECLINED THE SAME BY OBSERVING TH AT HIS VENDEES HAD DENIED TO HAVE PAID ANY CASH COMPONENT. HE WOULD A CCORDINGLY TREAT ALL THESE HEADS AS UNEXPLAINED INVESTMENT. 18. THE CIT(A) FIRST OF ALL DISCUSES ALL SEARCH STA TEMENT MADE BY ASSESSEES FAMILY MEMBERS. HE THEREAFTER PREPARES A CASH FLOW STATEMENT TO UPHOLD THE IMPUGNED ADDITION AS UNDER: 9.3 LOOKING AT THE CIRCUMSTANCES OF THE CASE THAT THE APPELLANTS ARE BASICALLY AGRICULTURIST AND THAT THEY HAVE NO OTHER SOURCE OF INCOME, BROADLY THE INVESTMENTS MADE BY THEM IN THE CONSTRUCTION OF HOUSE AND TEMPL E, PURCHASE OF NEW LAND AND IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 13 - INVESTMENT IN LIC AND MIS HAS TO BE ACCEPTED AS MAD E OUT OF THE SALE PROCEEDS OF THE LAND PROVIDED THEY HAVE SUFFICIENT FUNDS AS ON THE DATE OF MAKING THE INVESTMENTS. FOR THIS PURPOSE, IT WOULD BE RELEVANT TO REFER TO THE CASH FLOW STATEMENT AND THE INVESTMENTS MADE BY THE APPELLANT WHICH WERE SUBMITTED BEFORE THE AO AS UNDER: SHRL GANDABHAI AMBARAM MAKWANA / THAKOR DETAILS OF INVESTMENTS - DATE WISE DATE PARTICULARS AMOUNT 02-07-2007 INVESTMENT IN MIS 195000 MIS - 65325 (SENDHAJI G. THAKOR) 16-11-2007 BEING THE AMOUNT PAID TO DEEPKAMAL BAJAJ -NEW AUTO RICKSHAW PURCHASED IN THE NAME OF SENDHAJI MAKWANA 115280 16-11-2007 BEING THE AMOUNT PAID TO DEEPKAMAL BAJAJ -NEW AUTO RICKSHAW PURCHASED IN THE NAME OF RANJIT V. MAKWANA 129500 27-11-2007 OTHER ASSESSORIES PURCHASED 7720 02-01-2008 INVESTMENT IN MIS 300000 MIS - 65629 (SENDHAJI G. THAKOR 02-01-2008 INVESTMENT IN MIS 300000 MIS - 65630 (RANJIT V. THAKOR) 03-01-2008 195000 INVESTMENT IN LIC (FROM 03-01- 08 TO 28-01-08) 2950000 LIC - GANDAJI A. MAKWANA 03-01-2008 INVESTMENT IN LIC (FROM 03-01-08 TO 28-01-08) 2800000 LIC - SENDHAJI G MAKWANA 03-01-2008 INVESTMENT IN LIC (FROM 03-01-08 TO 28-01-08) 3100000 LIC - RANJIT MAKWANA 04-01-2008 INVESTMENT IN LIC (FROM 04-01-08 TO 28-01-08) 2750000 LIC - DINESH V. MAKWANA 24-01-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 11000 24-01-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 100000 05-02-2008 INVESTMENT IN MIS 300000 MIS - 65704 (MEENABEN SENDHAJI) 19-02-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 200000 IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 14 - 19-02-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 25000 09-03-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 150000 15-03-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 100000 05-04-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 100000 05-04-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 200000 05-04-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 150000 23-04-2008 BEING THE AMOUNT PAID TO NANDA AUTOMOBILES BIKE PURCHASED IN THE NAME OF SENDHAJI MAKWANA 46460 05-05-2008 BEING THE AMOUNT PAID TO NANDA AUTOMOBILES BIKE PURCHASED IN THE NAME OF RANJIT V MAKWANA 46460 05-05-2008 OTHER ASSESSORIES PURCHASED 7080 26-05-2008 BEING CASH PAID FOR PURCHASE OF KADI LAND 1500000 01-07-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES - A-2 PG-1 100000 08-09-2008 STAMP EXP RS. 44800/- AND REG. EXP. RS. 291 50/-LAN DAT.KADI 73950 15-10-2008 DALALI PAID TO JAYANTIBHAI 200000 TOTAL 15957450 SALE VALUE BLOCK 648 ADALAJ 21000000 DOCUMENT VALUE BY CHQ -5351519 ADVANCE FROM HEMENDRA L. SHAH 700000 TOTAL CASH COLLECTION 16348481 CASH BALANCE ON HAND 391031 9.4. FROM THE ABOVE CHART, IT IS CLEAR THAT THE APP ELLANT HAS MADE TOTAL INVESTMENT OF RS.4.50 LACS DURING THE PERIOD 2/7/2007 TO 27/11 /2007. THIS INVESTMENT WAS STATED TO HAVE BEEN MADE OUT OF THE AMOUNT OF RS.7L ACS RECEIVED BY THE APPELLANT AT THE TIME OF BANAKHAT OF THE LAND WITH SHRI HEMEN DRA SHAH. THE BALANCE INVESTMENT DURING THE PERIOD 2/1/2008 TO 15/10/2008 WERE STATED TO HAVE BEEN MADE BY THE APPELLANT OUT OF THE SALE PROCEEDS OF R S.2.10 CRORES. IT MAY BE MENTIONED THAT THE LAND IN QUESTION WAS SOLD TO SHR I HEMENDRA SHAH FOR RS.57,28,350 VIDE THE REGISTERED DEED DATED 27/9/20 07 WHICH WAS SIGNED BY SHRI IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 15 - ABBASBHAI MALIK, THE BROKER ON BEHALF OF THE APPELL ANT. THE DEED WAS CANCELLED SUBSEQUENTLY IN JUNE 2008 AFTER THE APPELLANT OBJEC TED TO THE TITLE CLEARANCE THROUGH HIS ADVOCATE SHRI R.K PRAJAPATI ON 9/5/2008 . THEREFORE, IT IS EXPECTED THAT THE APPELLANT WOULD HAVE GOT RS.71AKH AT THE TIME O F BANAKHAT OF THE LAND IN THE MONTH OF JULY 2007. THEREFORE, THE INVESTMENT OF RS .4.50 LACS MADE BY THE APPELLANT DURING THE PERIOD JULY 2007 TO NOVEMBER 2 007 CAN BE EXPLAINED OUT OF THE AMOUNT OF RS.7LACS RECEIVED BY THE APPELLANT AT THE TIME OF BANAKHAT OF THE LAND. 9.5. AS REGARDS THE INVESTMENTS MADE BY THE APPELLA NT DURING THE PERIOD JANUARY 2008 TO OCTOBER 2008, THE SAME WAS STATED T O HAVE BEEN MADE OUT OF THE TOTAL SALE CONSIDERATION OF RS.2.10 CRORES RECEIVED BY THE APPELLANT FROM THE BUYERS OF THE LAND NAMELY SHRI MANIBHAI PATEL, ASHOK C MOD Y, RAJULBEN DOSHI, SENDHABHAI DESAI AND OTHERS. IT MAY BE MENTIONED TH AT, THE AO DID NOT ACCEPT THE CONTENTION OF THE APPELLANT THAT THE INVESTMENT IN THE VARIOUS ASSETS AS MENTIONED ABOVE IN-THE CHART, HAVE BEEN MADE BY THE APPELLANT OUT OF THE SALE PROCEEDS OF THE LAND OF RS.2.10 CRORES, ON THE GROUND THAT THE APPE LLANT HAD NOT FURNISHED THE CONFIRMATION FROM THE BUYERS OF THE LAND THAT THEY HAD PAID CASH OF RS. 1.57 CRORES OVER AND ABOVE THE CHEQUE AMOUNT OF RS.53 LACS TO T HE APPELLANT. AT THE SAME TIME, THE SAME AO HAS ALSO MADE THE ADDITION OF THE CASH COMPONENT PAID BY THE BUYERS OF THE LAND. THEREFORE, ON THE ONE HAND, THE AO HAS ACCEPTED IN THE CASE OF THE BUYERS THAT THE CASH AMOUNT HAS BEEN PAID BY TH E BUYERS OF THE LAND FOR THE PURCHASE OF THE LAND FROM THE APPELLANTS WHEREAS, O N THE OTHER HAND, IN THE CASE OF THE SELLERS HE DOES NOT ACCEPT THAT THE CASH HAS BE EN RECEIVED BY THE APPELLANTS FROM THE BUYERS OF THE LAND. THIS STAND OF THE AO C ANNOT BE ACCEPTED BY ME. THE AO CANNOT ADOPT DIFFERENT YARDSTICKS IN THE CASE OF BUYERS AND SELLERS. IN VIEW OF THE STATEMENTS RECORDED AT THE TIME OF SEARCH OF TH E APPELLANT AND; HIS FAMILY MEMBERS AS WELL AS THE BROKER OF THE SELLERS, I HAV E NO HESITATION IN MY MIND IN HOLDING THAT THE INVESTMENT IN CONSTRUCTION OF HOUS E AND TEMPLES, PURCHASE OF BIKES, PURCHASE OF LAND AT KADI, INVESTMENT IN LIC AND MIS ETC. ARE MADE OUT OF THE SALE PROCEEDS OF THE LAND. 9.6. HOWEVER, THE APPELLANT SHRI GANDABHAI MAKWANA AND OTHER FAMILY MEMBERS HAD STATED THAT AN AMOUNT OF RS.35 LAKH WAS RECEIVE D IN CASH AT THE TIME OF DASTAVEJ. IN OTHER WORDS, CASH OF RS.35 LACS WAS RE CEIVED BY THEM FROM THE 'BUYERS OF THE LAND AT THE TIME OF SIGNING THE AGRE EMENT ON 11/8/2008. THE BALANCE AMOUNT OF RS.122 LACS IN CASH WAS RECEIVED BY THEM BEFORE SIGNING THE AGREEMENT. ON THE PERUSAL OF THE INVESTMENTS MADE BY THE APPEL LANT AND HIS FAMILY MEMBERS, IT IS NOTICED THAT TILL 1/7/2008, THE TOTAL INVESTMENT S MADE BY THE APPELLANT AND HIS FAMILY MEMBERS COMES TO RS. 157,57,450. IF THE ONLY SOURCE OF INVESTMENT IN THE ABOVE MENTIONED ASSETS IS THE SALE PROCEEDS OF THE LAND AND OUT OF THE TOTAL SALE PROCEEDS OF R$. 2.10 CRORES, THE APPELLANTS HAVE RE CEIVED THE CASH OF RS.35 LACS AND THE CHEQUE AMOUNT OF RS.53 LACS AT THE TIME OF SIGNING OF THE AGREEMENT, THEN THEY HAD RECEIVED THE BALANCE AMOUNT OF RS. 1.22 CR ORES UP TO 1/7/2008. WHEREAS, AS PER THE INVESTMENT CHART OF THE APPELLANT, THE T OTAL INVESTMENT MADE BY THEM IS .RS. 157,57450. THIS MEANS, THE EXCESS INVESTMENT TO THE EXTENT-OF RS.35:57 LACS IS NOT EXPLAINED. AS MENTIONED THE APPELLANT CAN BE GIVEN THE BENEFIT OF RS.7 LAKH CLAIMED TO HAVE BEEN RECEIVED FROM SHRI HEMENDRA SH AH AS FORFEITURE OF THE ADVANCES. THE BALANCE AMOUNT OF RS.28.57 LACS, IN M Y VIEW, REMAINS UNEXPLAINED. EXCEPT FOR THIS ADDITION OF RS.28.57 LACS ALL OTHER INVESTMENTS MADE BY THE IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 16 - APPELLANT AND HIS FAMILY MEMBERS ARE PROPERLY EXPLA INED. IN OTHER WORDS, ON THE GROUND OF INVESTMENTS, ADDITION OF RS.28.57 LAKHS O NLY IS SUSTAINED AND THE BALANCE ADDITIONS ARE DIRECTED TO BE DELETED. 9.7. NOW THE QUESTION IS IN WHOSE HAND THE INVESTME NT OF RS.28.57 LACS IS TO BE TREATED AS UNACCOUNTED. THE CONTENTION OF THE APPEL LANT WAS THAT THE LAND IN QUESTION WAS IN THE JOINT NAMES OF THE FAMILY MEMBE RS OF SHRI GANDABHAI MAKWANA, WHEREAS, THE CASE OF THE AO IS THAT THE LA ND STANDS IN THE NAME OF ONLY SHRI GANDABHAI MAKWANA AND NOT OTHER FAMILY MEMBERS . IN THIS CONNECTION, THE AR WAS ASKED TO PRODUCE BEFORE ME THE EVIDENCE THAT THE LAND IN QUESTION WAS HELD JOINTLY BY THE FAMILY MEMBERS OF SHRI GANDABHAI MAK WANA. THE HACK PATRAK PRODUCED BEFORE THE AO ALSO SHOWS THE NAME OF SHRI GANDABHAI MAKWANA ONLY. FURTHER, THE SALE DEED WAS .ALSO EXECUTED BY SHRI G ANDABHAI MAKWANA ALONE. EVEN IF THE LAND WAS ANCESTRAL, THE AR COULD NOT PR ODUCE THAT THE LAND WAS JOINTLY HELD BY OTHER FAMILY MEMBERS ALSO. IT IS LIKELY THA T OTHER FAMILY MEMBERS MIGHT HAVE TRANSFERRED THEIR RIGHTS IN FAVOUR OF SHRI GAN DABHAI MAKWANA AND THEREFORE, THE NAME OF OTHER FAMILY MEMBERS IS NOT APPEARING I N THE RECORDS OF LAND REVENUE. THEREFORE, I ALSO HOLD THAT THE LAND WAS OWNED BY S HRI GANDABHAI MAKWANA ALONE AND THE SALE PROCEEDS THEREOF WAS UTILISED BY HIM I N ACQUIRING OTHER ASSETS SUCH AS LIC POLICY, MIS, CONSTRUCTION OF HOUSE AND TEMPLE E TC. IN THE NAME OF OTHER FAMILY MEMBERS. THE UNACCOUNTED INVESTMENT IS THEREFORE; T O BE CONSIDERED IN THE HANDS OF SHRI GANDABHAI MAKWANA. ACCORDINGLY, THE INVESTM ENTS TO THE EXTENT OF RS.28.57 LACS MADE BY HIM ( IN ASSESSMENT YEAR 2009 -10 OF RS.23,23,950 AND THE BALANCE AMOUNT OF RS.5.33-LACS IN ASSESSMENT YEAR 2 008-09) IS TREATED AS UNEXPLAINED. THE ADDITIONS ON ACCOUNT OF INVESTMENT S MADE BY THE AO IN THE FOLLOWING ASSESSMENT YEARS ARE DIRECTED TO BE DELET ED: 1. LATE SHRI GANDABHAI MAKWANA RS. 37,31,000- 5.33 LACS = RS. 31.98 LACS ASSESSMENT YEAR 2008-09. 2. SHRI SENDHABHAI G MAKWANA RS.35,15,280 IN AS SESSMENT YEAR 2008-09 AND RS.46,460 IN ASSESSMENT YEAR 2009-10. 3. SHRI RANJIT V MAKWANA RS. 53,540 IN ASS ESSMENT YEAR 2009-10 AND RS.35,37,220 IN ASSESSMENT YEAR 2008-09. 10. IN OTHER WORDS, THE APPEAL IN THE CASE OF LATE SHRI GANDABHAI MAKWANA IN ASSESSMENT YEAR 2008-09 IS PARTLY ALLOWED AND THE A PPEALS OF SHRI SENDHABHAI G MAKWANA IN ASSESSMENT YEAR 2008-09 AND ASSESSMENT Y EAR 2009-10 AND SHRI RANJ IT V. MAKWANA IN ASSESSMENT YEAR 2008-09 AND 2009-1 0 ARE ALLOWED. 19. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEES ONLY SUBMISSION BEFORE US IS THAT THE AUTHORITIES BELOW NOWHERE APPRECIATE THE FACT THAT HE HAS BEEN A FARMER SINCE LONG DERIVING INCOME FROM AGRICULTURE AND DAIRY FARMING. HE FURTHER CONTENDS THAT THERE ARE OTHER SOURCES OF IN COME I.E. PASSENGER VEHICLES AND OTHER FARM WORKS. SHRI PATEL AT THIS STAGE STR ONGLY SUPPORTS BOTH THE IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 17 - LOWER AUTHORITIES ACTION. HE STATES THAT THE ASSES SEE OUGHT TO HAVE PLACED ON RECORD ALL NECESSARY DETAILS IN SUPPORT OF THE ABOV E CONTENTION. HE HOWEVER IS UNABLE TO DISPEL ASSESSEES FUNDAMENTAL CONTENTI ON THAT HE HAS BEEN A FARMER SINCE LONG WHO HAS ADMITTEDLY SOLD HIS AGRIC ULTURAL LANDS IN QUESTION TOTALLING TO 14 BIGHAS. IT IS EVIDENT TO US THAT T HE THIRD ASSESSEE SHRI RANJIT MAKWANA HAS ALSO CLAIMED TO BE OWNER OF HALF SHARE ON THE ABOVE LAND WHO HAS SIGNED THE SALE DEED AS A CONFIRMING PARTY. IT THUS EMANATES THAT SHRI GANDABHAI WAS OWNER IN POSSESSION OF 7 BIGHAS AGRIC ULTURAL LAND WHICH WAS SOLD IN THE MIDST OF THE RELEVANT PREVIOUS YEAR I.E . SEPTEMBER 2008. WE THUS ADOPT ESTIMATION METHOD IN THE LARGER INTEREST OF JUSTICE TO CONCLUDE THAT THE ASSESSEE MUST HAVE EARNED AROUND A SUM OF RS.2.5LAC S FROM ALL THE ABOVE SOURCES. IT IS MADE CLEAR THAT OUR ESTIMATION SHAL L NOT BE TREATED AS A PRECEDENT. WE ACCORDINGLY CONFIRM THE IMPUGNED ADD ITION OF RS.23,23,950/- TO RS.20,73,950/- AND GRANT THE ABOVE RELIEF OF RS. 2.5LACS TO THE ASSESSEE. THIS FIRST SUBSTANTIVE GROUND IS PARTLY ACCEPTED. 20. THE ASSESSEES THIRD SUBSTANTIVE GROUND PLEADS THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN OBSERVING THAT IF THE LAND IN QUESTION IS NOT A CAPITAL ASSET, THE ABOVE FORFEITED AMOUNT OF RS.7LA CS WOULD BE TREATED AS HIS INCOME LIABLE TO TAX U/S.5 OF THE ACT. THERE IS NO T DISPUTE THAT THE ASSESSEE HAS FORFEITED THE ABOVE SUM PERTAINING TO THE LAND IN QUESTION. THERE IS FURTHER NO ISSUE THAT HIS LANDS ARE AGRICULTURAL. WE OBSERVE IN THESE FACTS THAT THERE IS NO REASON FOR US TO AGREE WITH THE CIT(A) S DIRECTION HEREINABOVE THAT THE ABOVE SUM OF RS.7LACS WOULD BE TAXED AS INCOME U/S.5 OF THE ACT IN SPITE OF THE FACT THAT THE LAND SOLD IS NOT A CAPITAL ASS ET U/S.2(14) OF THE ACT. SHRI PATEL FAILS TO TAKE US TO ANY SPECIFIC PROVISION IN THE ACT PROVIDING FOR TAXATION OF SUCH AN AMOUNT INVOLVING SALE OF EXEMPT AGRICULTURAL LAND. WE THUS ACCEPT ASSESSEES THIRD SUBSTANTIVE GROUND. L D. COUNSEL REPRESENTING ASSESSEE AT THIS STAGE POINTS OUT THAT REVENUES SU BSTANTIVE GROUND NO.4 IS IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 18 - ALSO A CONNECTED ONE SINCE PLEADING THAT THE ABOVE SUM OF RS.7LACS IS NON REFUNDABLE. WE QUOTE OUR DISCUSSION HEREINABOVE TO DECLINE THE SAME. THE ASSESSEES APPEAL IT(SS)A NO.09/AHD/2012 IS PARTLY ACCEPTED. 21. WE NOW ADVERT TO REVENUES CROSS APPEAL IT(SS)A NO.21/AHD/2012 INVOLVING THE REMAINING TWO GROUNDS APART FROM THOS E ALREADY DEALT WITH IN ASSESSEES APPEAL HEREINABOVE. ITS FIRST SUBSTANTI VE GROUND SEEKS TO REVIVE UNEXPLAINED CASH AMOUNT ADDITION OF RS.1.5LACS AS M ADE IN THE COURSE OF ABOVE ASSESSMENT AND DELETED IN THE LOWER APPELLATE PROCEEDINGS. THERE DOES NOT APPEAR TO BE ANY DISPUTE THAT THE SEARCH AUTHOR ITIES HAD FOUND TOTAL CASH AMOUNT OF RS.33,50,500/- AT ASSESSEES RESIDENCE. THEY WOULD SEIZE A SUM OF RS.33LACS THEREFROM. THE ASSESSEE TRIED TO EXPLAIN TO HAVE WITHDRAWN RS.95000/- ON 07.07.2008 I.E. ALMOST THREE MONTHS B EFORE THE ABOVE SEARCH. HE FURTHER ATTRIBUTED SOME AMOUNT TO IS AGRICULTURA L INCOME WITHOUT STATING ANY PARTICULARS THEREOF. THE ASSESSING OFFICER REJ ECTED THE SAID EXPLANATION TO MAKE THE IMPUGNED ADDITION OF RS.1.5LACS. 22. WE COME TO THE LOWER APPELLATE PROCEEDINGS NOW. IT HAS ALREADY COME ON RECORD THAT THE CIT(A) PREPARED A FUND FLOW CHAR T AS REPRODUCED IN PRECEDING PARAS TO CONCLUDE THAT THE ABOVE SUM FORM S PART OF THE TOTAL SALE CONSIDERATION AMOUNTING TO RS.2.10CRORES (SUPRA). WE HAVE ALREADY OBSERVED HEREINABOVE THAT THE ASSESSING AUTHORITY ITSELF ASS ESSED THE VERY FIGURE FOR THE PURPOSE OF MAKING CAPITAL GAINS ADDITION. LD. DEPA RTMENTAL REPRESENTATIVE FAILS TO REBUT THE ABOVE CASH FLOW CHART. WE THUS FIND NO REASON TO INTERFERE IN THE CIT(A)S ORDER DELETING THE IMPUGNED ADDITIO N. THIS REVENUES GROUND FAILS. 23. THIS LEAVES US WITH REVENUES ONLY REMAINING GR OUND YET TO BE ADJUDICATED AS PERTAINING TO ADDITION OF RS.57,28,3 50/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CASH PAYMENT FOR CA NCELLATION OF SALE DEED IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 19 - WITH SHRI HEMENDRA SHAH (VENDEE). WE COME TO PAGE 41 OF THE CIT(A)S ORDER DISCUSSING THE ISSUE AS UNDER: 11.5. AS REGARDS THE ADDITION OF RS.57,28,350 ON ACCOUNT OF UNEXPLAINED PAYMENT FOR CANCELLATION OF SALE DEED WITH SHRI HEM ENDRA L SHAH, THE AO IN PARA NUMBER 8 OF THE ASSESSMENT ORDER HELD THAT AS PER P AGE NUMBER 22 AND 23 OF THE SALE DEED, THE APPELLANT GAVE AN AMOUNT OF RS.57,28 ,350 IN CASH IN INSTALMENTS TO SHRI HEMENDRA L SHAH FOR CANCELLATION OF THE DEED. BEFORE THE AO, THE CONTENTION OF THE APPELLANT WAS THAT HE RECEIVED ONLY RS. 7LAC S AT THE TIME OF BANAKHAT OF THE LAND IN THE MONTH OF JUNE/JULY 2007 FOR WHICH POWER OF ATTORNEY WAS GIVEN TO ONE SHRI ABBASBHAI MALIK. THE BROKER SHRI ABBASBHAI MAL IK KEPT THE APPELLANT IN DARK AND SOLD THE LAND TO SHRI HEMENDRA L SHAH BY SIGNIN G THE SALE DEED RN THE CAPACITY OF THE POWER OF ATTORNEY HOLDER OF THE APP ELLANT AND COLLECTED CASH OF RS. 50 LAKHS FROM HIM BUT DID NOT GIVE THE AMOUNT TO TH E APPELLANT. SUBSEQUENTLY, THE APPELLANT OBJECTED AGAINST THE TITLE CLEARANCE PUBL IC NOTICE AND FINALLY THE DOCUMENT WAS CANCELLED BY SHRI HEMENDRA L SHAH AND THE SAME LAND WAS SOLD TO SHRI MONIBHAI V PATEL AND OTHERS FOR RS. 2.10 CRORE S. THIS FACT WAS ALSO BROUGHT TO THE NOTICE OF THE SEARCH PARTY AT THE TIME OF RE CORDING THE STATEMENT OF THE APPELLANT AND THEIR FAMILY MEMBERS DURING THE COURS E OF SEARCH ON 15/10/2008 ITSELF. AT THE TIME OF CANCELLATION OF THE SALE DEE D, THE APPELLANT DID NOT PAY ANY AMOUNT TO SHRI HEMENDRA L SHAH BUT FORFEITED THE AM OUNT OF RS. 7LACS RECEIVED FROM HIM BY THE APPELLANT 'AT THE TIME OF THE BANAK HAT OF THE LAND. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTION OF THE APPELLANT A ND HELD THAT NOBODY WILL EXECUTE SALE DEED WITHOUT RECEIVING ANY CONSIDERATI ON. ACCORDING TO THE AO, THE APPELLANT MUST HAVE RECEIVED THE SALE CONSIDERATION IN CASH ON EXECUTION OF SALE DEED ON 27/9/2007 AND THE SAME MUST HAVE BEEN UTILI SED BY THE APPELLANT. THEREFORE THE CASH PAYMENT OF RS.57,28,350 MADE BY THE APPELLANT FOR EXECUTING THE CANCELLATION DEED ON 21/6/2008 WAS TREATED BY H IM AS UNEXPLAINED INVESTMENT. THE SUBMISSION OF THE APPELLANT BEFORE THE AO WAS T HAT THE APPELLANT HAD NOT PAID ANY AMOUNT TO SHRI HEMENDRA L SHAH FOR CANCELLING T HE DEED ON 21/6/2008. THE APPELLANT RECEIVED ONLY RS. 7LACS FROM SHRI HEMENDR A L SHAH AT THE TIME OF BANAKHAT IN THE MONTH OF J.UNE/JULY 2007 AND THE BA LANCE AMOUNT OF RS. 50. LACS, IF ANY, WAS RECEIVED BY HIS BROKER SHRI ABBASBHAI M ALIK. IN FACT, AT THE TIME OF THE CANCELLATION OF THE DEED ON 21/6/2008 THE APPELLANT DID NOT EVEN RETURN THE AMOUNT OF RS. 7LACS TO SHRI HEMENDRA L SHAH AND FORFEITED THE AMOUNT OF RS. 7LACS WHICH HAS BEEN SHOWN BY THE APPELLANT IN THE RETURN' OF I NCOME. IN MY OPINION; THE VIEW OF THE AO CANNOT BE SUSTAINED ON THIS POINT PARTICU LARLY WHEN, THE AO HAS ACCEPTED THAT THE SALE DEED OF THE LAND WITH SHRI H EMENDRA L SHAH WAS EXECUTED FOR R S .57.28 LACS AND AT THE TIME OF CANCELLATION OF THE SALE DEED, THE AMOUNT OF RS. 57.28 LACS WAS RETURNED TO HIM. IF IT IS SO, TH EN THE AMOUNT OF RS.57.28 LACS RECEIVED AT THE TIME OF EXECUTING THE SALE DEED HAD BEEN RETURNED BY THE APPELLANT TO SHRI HEMENDRA L SHAH AT THE TIME OF CANCELLATION OF THE DEED. IN OTHER WORDS, THE SOURCE OF THE AMOUNT OF RS.57.28 LACS GETS EXPL AINED. THE ADDITION OF RS.57,28,350 IS DIRECTED TO BE DELETED. 24. IT HAS THUS COME ON RECORD THAT THE ASSES SEE PAID BACK THE IMPUGNED ADVANCE SUM OF RS.57.28 LACS BACK TO THE A BOVE VENDEE. IT IS IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 20 - THEREFORE CLEAR THAT THE ABOVE ADVANCE SUM FORMED S OURCE OF THE RETURNED AMOUNT IN QUESTION. THE REVENUE ALSO FAILS TO REBU T THIS FACTUAL POSITION. IT SUBSTANTIVE GROUND IN QUESTION IS THUS DECLINED. REVENUES APPEAL IT(SS)A NO.21/AHD/2012 IS PARTLY ACCEPTED FOR STATISTICAL P URPOSES. 25. WE COME TO ASSESSMENT YEAR 2008-09 NOW INVOLVIN G THE REMAINING FOUR APPEALS. IT(SS)A NO.8/AHD/2012 IS ASSESSEES APPEAL. HIS SOLE SUBSTANTIVE GROUND SEEKS TO ASSAIL CORRECTNESS OF U NEXPLAINED INVESTMENT IN ASSETS ADDITION OF RS.5.33LACS. BOTH THE LOWER AUT HORITIES HOLD THAT THE SAME IS NOT FROM THE ABOVESTATED SALE CONSIDERATION AMOU NT OF RS.2.1 CRORES. THE CIT(A) HOLDS IN PARA 9.7 OF THE ORDER THAT THE DECE ASED ASSESSEE WAS SOLE OWNER OF THE LAND AND HE UTILIZED SALE PROCEEDS THE REOF IN ACQUIRING VARIOUS ASSETS SUCH AS LIC POLICY, MONTHLY INCOME SCHEME A ND CONSTRUCTION OF HOUSE AND TEMPLE IN THE NAMES OF OTHER FAMILY MEMBE RS. HE THEREAFTER CONCLUDES THAT THE ABOVE CASH FLOW CHART HAD ALREAD Y MADE IT CLEAR THAT THE REMAINING FIGURE IN QUESTION OF RS.5.33 LACS IN THE IMPUGNED ASSESSMENT YEAR HAS REMAINED UNEXPLAINED. HE HAS ACCORDINGLY CONFI RMED THE IMPUGNED ADDITION. 26. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEES ONLY CONTENTION BEFORE US IS THAT THE AUTHORITIES BELOW HAVE NOT GIVEN HIM ANY CREDIT OF AGRICULTURAL INCOME DERIVED FROM THE LAND SOLD AS WELL THE OTHE R SOURCE IS OF DAIRY FARMING AND PLYING OF PASSENGER VEHICLES. LD. DEP ARTMENTAL REPRESENTATIVE VEHEMENTLY OPPOSES THE SAME BY STATING THAT THE ASS ESSEE OUGHT TO HAVE FILED THE NECESSARY EVIDENCE ON RECORD BEFORE CLAIMING SU CH A RELIEF. HE HOWEVER DOES NOT DISPUTE THAT THE ASSESSEE VERY MUCH OWNED THE ABOVE AGRICULTURAL LANDS AS SOLD IN PREVIOUS YEAR RELEVANT TO THE SUCC EEDING ASSESSMENT YEAR. WE THEREFORE ADOPT ESTIMATION METHOD HEREIN AS WELL TO CONCLUDE THAT LARGER INTEREST OF JUSTICE WOULD BE MADE IN CASE ASSESSEE S ANNUAL INCOME FROM IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 21 - ABOVE AGRICULTURAL LANDS ETC. IS TAKEN AS RS.3.5 LA CS IN THE IMPUGNED ASSESSMENT YEAR AS WELL. NEEDLESS TO SAY, BOTH THE LOWER AUTHORITIES HAVE NOT TAKEN INTO CONSIDERATION THE ASSESSEES AGRICULTURA L LAND AS SOURCE OF INCOME. THE IMPUGNED ADDITION IS ACCORDINGLY RESTRICTED FRO M RS.5.33LACS TO RS.1.83LACS ONLY. THIS ASSESSEES GROUND AS WELL A S MAIN APPEAL IT(SS)A NO.8/AHD/2012 IS PARTLY ACCEPTED. 27. NEXT THREE ARE REVENUES APPEALS IT(SS)A NOS. 1 9, 20 & 22/AHD/2012 FILED IN RESPECTIVE CASES OF ALL THE THREES ASSESSE ES NAMELY SHRI RANJIT V MAKWANA, SHRI GANDABHAI MAKWANA AND SHRI SENDHABHAI MAKWANA. THE REVENUES SOLE SUBSTANTIVE GROUND IDENTICAL (THE ON LY DIFFERENCE BEING IN THE AMOUNTS INVOLVED IN CORRESPONDING ADDITION FIGURES) IN ALL THREE CASES SEEKS TO REVIVE UNEXPLAINED INVESTMENT ADDITIONS OF RS.35 ,37,220/-, RS.31.98LACS & RS.35,15,280/- AS MADE IN LIC POLICIES, CONSTRUCTIO N OF HOUSE/TEMPLE AND MONTHLY INCOME SCHEMES. THE ASSESSING OFFICER DECL INED ASSESSEES EXPLANATION ON IDENTICAL LINES AS TO HAVE ACQUIRED ALL THESE ASSETS FROM THE ABOVE SALE CONSIDERATION OF RS.2.1CRORES (SUPRA). THE ASSESSING OFFICER REJECTED THE SAME AFTER HOLDING THAT THE VENDEES IN QUESTION HAD NOT SUPPORTED THE ABOVE CONSIDERATION AMOUNT. IT HAS COME ON REC ORD THAT WE HAVE ALREADY OBSERVED THAT THE ASSESSING OFFICERS ABOVE STAND G OES CONTRARY TO THE CAPITAL GAIN ADDITIONS WHEREIN THE VERY FIGURE HAS BEEN TAK EN AS THE GROSS SALE CONSIDERATION. WE NOW NOTICE ON MERITS THAT THE CI T(A)S FUND FLOW CHART PREPARED AND EXTRACTED IN THE PRECEDING PARAGRAPH DULY CONSIDERS NOT ONLY THE IMPUGNED INVESTMENT BUT ALSO SOURCE THEREOF IN ORDER TO UPHOLD ASSESSEES CONTENTIONS TO HAVE ACQUIRED ALL THESE A SSETS OUT OF THE LAND SALE CONSIDERATION. LD. DEPARTMENTAL REPRESENTATIVE DOE S NOT PLACE ON RECORD ANY MATERIAL TO CONTRADICT CORRECTNESS THEREOF IN THE C OURSE OF ARGUMENTS. WE THUS FIND NO REASON TO INTERFERE WITH THE CIT(A)S COMMON ORDER UNDER IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 22 - CHALLENGE IN ALL THESE THREE APPEALS. IT(SS)A NOS. 19, 20 & 22/AHD/2012 ARE DECLINED. 28. WE REFER TO OUR ABOVE DISCUSSION TO PARTLY ALLO W ASSESSEES APPEALS IT(SS)A NOS. 8 & 9/AHD/2012. REVENUES APPEAL IT(S S)A NO.21/AHD/2012 IS PARTLY ACCEPTED FOR STATISTICAL PURPOSES. ITS T HREE OTHER APPEALS IT(SS)A NOS. 19, 20 & 22/AHD/2012 ARE DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 16 TH DAY OF DECEMBER, 2016.] SD/- SD/- (PRADIP KUMAR KEDIA) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 16/12/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )* + ,--. . /0 / DR, ITAT, AHMEDABAD 1 + 23 4 5 / GUARD FILE. BY ORDER / . // . /0 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER IT(SS)A NOS. 8, 9, 20 & 21/AHD/2012 (ASSESSMENT YEAR:2008-09 & 2009-10) LATE SHRI GANDABHAI A MAKWANA THROUGH L.H. SHRI SENDHABHAI G MAKWANA, MAHADEV VAS, AT & POST ADALAJ, DIST. GANDHINAGAR APPELLANT VS. THE DY. CIT, CENT. CIR. -1(3), AAYKAR BHAVAN, NAVRANGPURA, AHMEDABAD RESPONDENT/ C ROSS APPELLANT PAN: BALPM7617K & IT(SS)A NOS. 19/AHD/2012 (ASSESSMENT YEAR:2008-09) ASSTT.CIT, CENTRAL CIRCLE 1(3), ROOM NO.304, 3 RD FLOOR, AAYKAR BHAVAN, NAVRANGPURA, AHMEDABAD APPELLANT VS. RANJIT V. MAKWANA, MAHADEV VAS, AT & POST: ADALAJ, GANDHINAGAR, PIN CODE: 382421 RESPONDENT PAN: BACPM7842M IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 2 - & IT(SS)A NOS. 22/AHD/2012 (ASSESSMENT YEAR:2008-09) ASSTT.CIT, CENTRAL CIRCLE 1(3), ROOM NO.304, 3 RD FLOOR, AAYKAR BHAVAN, NAVRANGPURA, AHMEDABAD APPELLANT VS. SENDHABHAI G MAKWANA, MAHADEV VAS, AT & POST: ADALAJ, GANDHINAGAR, PIN CODE: 382421 RESPONDENT PAN: BACPM7841J / BY ASSESSEE : SHRI ANKIT TALSANIA, A.R. / BY REVENUE : SHRI R. I. PATEL, CIT. D.R. /DATE OF HEARING : 01.12.2016 /DATE OF PRONOUNCEMENT : 16.12.2016 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS IS A SET OF SIX APPEALS. IT PERTAINS TO THREE DIFFERENT ASSESSEES NAMELY SHRI GANDABHAI A. MAKWANA (SINCE DECEASED), HIS SON / LEGAL HEIR AS WELL AS SECOND ASSESSEE SHRI SENDABHAI G MAKWANA AN D THE THIRD ASSESSEE SHRI RANJIT MAKWANA. THESE APPEALS RELATE TO ASSES SMENT YEARS 2008-09 & 2009-10. THEY ARISE FROM CIT(A)-III, AHMEDABADS COMMON ORDER PASSED IN CASE NOS. CIT(A)-III/90 TO 95/CC-I(3)/11-12 DATE D 15.11.2011 IN IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 3 - PROCEEDINGS U/S.143 (3) R.W.S. 153A(1)(B) R.W.S. 15 3B(1)(B) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. FORMER ASSESSMENT YEAR 2008-09 INVOLVES FOUR CAS ES. SHRI SENDABHAI HAS FILED IT(SS)A NO.8/AHD/2012 IN THE CAPACITY OF HIS FATHER/DECEASED ASSESSEE SHRI GANDABHAIS LEGAL HEIR. THIS IS FOLL OWED BY REVENUES TWO APPEALS IT(SS)A NO.20 & 22/AHD/2012 IN CASE OF THE ABOVE DECEASED ASSESSEE AND SHRI SENDABHAI HIMSELF. THIS IS FOLLO WED BY REVENUES YET ANOTHER APPEAL IT(SS)A NO.19/AHD/2012 FILED IN CASE OF THE LAST ASSESSEE SHRI RANJIT MAKWANA. 3. WE COME TO LATTER ASSESSMENT YEAR 2009-10 INVOLV ING CROSS APPEALS IN CASE OF SHRI GANDABHAI THROUGH HIS LEGAL HEIR SHRI SENDABHAI HEREINABOVE AND REVENUES APPEAL IT(SS)A NOS.9 & 21/AHD/2012; R ESPECTIVELY. 4. WE NOW DEEM IT APPROPRIATE TO DEAL WITH THE RELE VANT PLEADINGS IN ALL THE ABOVE APPEALS. THE ASSESSEES APPEAL IT(SS)A N O.8/AHD/2012 RAISES A SOLITARY SUBSTANTIVE GROUND CHALLENGING UNEXPLAINED INVESTMENT ADDITION IN ASSETS OF RS.5.33LACS AS MADE BY BOTH ASSESSING AS WELL AS LOWER APPELLATE AUTHORITY. REVENUES APPEAL IT(SS)A NO.20/AHD/2012 SEEKS TO REVIVE THE ASSESSING OFFICERS ACTION IN ADDING A SUM OF RS.37 .31LACS ON ACCOUNT OF ASSESSEE SHRI GANDABHAIS UNEXPLAINED INVESTMENT MA DE IN LIC, HOUSE AND TEMPLE CONSTRUCTION AND MONTHLY INCOME SCHEMES AS D ELETED TO THE TUNE OF RS.31.98LACS IN COURSE OF THE LOWER APPELLANT PROCE EDINGS. ITS NEXT APPEAL IT(SS)A NO.22/AHD/2012 ONCE AGAIN RAISES SOLE SUBST ANTIVE GROUND IN CHALLENGING THE LOWER APPELLATE ORDER DIRECTING THE ASSESSING OFFICER TO DELETE UNEXPLAINED INVESTMENT OF RS.35,15,280/- AS MADE IN THE ABOVE THREE KINDS OF INSTRUMENTS. THE REVENUES LAST APPEAL IN THIS ASSESSMENT YEAR IT(SS)A NO.19/AHD/2012 IN CASE OF SHRI RANJIT MAKWA NA ALSO PLEADS THAT IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 4 - THE CIT(A) HAS WRONGLY DELETED UNEXPLAINED INVESTME NTS OF RS.35,37,220/- AS MADE IN ABOVE THREE CATEGORIES. 5. WE HAVE ALREADY NARRATED THAT THE LATTER ASSESSM ENT YEAR INVOLVES TWO APPEALS. SHRI SENDHABHAI FILES IT(SS)A NO.9/AHD/20 12 RAISING THREE SUBSTANTIVE GROUNDS IN CHALLENGING THE CIT(A)S ORD ER CONFIRMING UNEXPLAINED INVESTMENT ADDITION OF RS.23,23,950/- I N VARIOUS ASSETS ON THE GROUND THAT THE SAME DO NOT HAVE ANY NEXUS WITH THE SALE CONSIDERATION OF THE LAND SOLD. HIS SECOND SUBSTANTIVE GROUND ASSAILS C ORRECTNESS OF THE LOWER APPELLATE ORDER SETTING ASIDE CAPITAL ASSET ISSUE P ERTAINING TO ASSESSEES AGRICULTURAL LAND SOLD THEREBY DIRECTING THE ASSESS ING OFFICER TO DECIDE IT AFRESH AFTER VERIFYING ITS DISTANCE FROM AHMEDABAD AND GANDHINAGAR MUNICIPALITIES INSPITE OF THE ALLEGED FACT THAT TH E SAME IS WELL BEYOND A DISTANCE OF AT LEAST 9 KILOMETERS THEREFROM. THIRD AND LAST SUBSTANTIVE GROUND AVERS THAT THE CIT(A) HAS FURTHER ERRED IN HOLDING THAT IF ASSESSEES ABOVE LAND SOLD IS NOT FOUND TO BE A CAPITAL ASSET BEING SITUATED BEYOND A DISTANCE OF EIGHT AND FOUR KILOMETERS FORM THE ABOVE TWO MUNICI PALITIES, THE ADVANCE AMOUNT OF RS.7LACS BEING FORFEITED AT HIS BEHEST WO ULD BE LIABLE TO BE TAXED U/S.5 OF THE ACT. 6. THIS FOLLOWS REVENUES CROSS APPEAL IT(SS)A NO.2 1/AHD/2012. IT RAISES FOUR SUBSTANTIVE GROUNDS INTER ALIA PLEADING THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING UNEXPLAINED CASH AD DITION OF RS.1.5LACS, IN DIRECTING THE ASSESSING OFFICER TO VERIFY WHETHER T HE ASSESSEES LANDS DISTANCE FROM THE ABOVE TOW MUNICIPALITIES IN ORDER TO DECIDE AS IF THE SAME IS A CAPITAL ASSET U/S.2(14) OR NOT GIVING RISE TO CAP ITAL GAINS, IN DIRECTING THE ASSESSING OFFICER TO DELETE ADDITION OF RS.57,28,35 0/- MADE ON ACCOUNT OF CASH PAYMENT FOR CANCELLATION OF SALE DEED WITH SHR I HEMENDRA SHAH AND IN FURTHER APPLYING PROVISION OF SECTION 51 OF THE AC T FOR THE COST OF ACQUISITION IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 5 - OF LAND ALLEGEDLY AFTER IGNORING THE FACT THAT THE ASSESSEE HAS EARNED RS.7LACS AS FORFEITED MONEY IN THE NATURE OF NON REFUNDABLE SUM; RESPECTIVELY. 7. BOTH THE LD. REPRESENTATIVES STATE AT THE OUTSET THAT THE MAIN SUBSTANTIVE ISSUE IN THE INSTANT APPEALS IS THAT OF NATURE OF S HRI GANDABHAIS AGRICULTURAL LANDS COMPRISED IN BLOCK NO.648, VILL. ADALAJ, DIST . GANDHINAGAR. THEY SUBMIT THAT THE ASSESSING OFFICER HAD TREATED THIS TRACT OF LAND AS A CAPITAL ASSET U/S.2(14)(III)(B) OF THE ACT. THE CIT(A) HAS REMITTED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO VERIFY THE ABOVE L ANDS DISTANCE FROM AHMEDABAD AND GANDHINAGAR MUNICIPALITIES AS TO WHET HER THE SAME COMES WITHIN A DISTANCE OF 8 OR 4 KILOMETERS; RESPECTIVEL Y OR NOT. WE THUS PROCEED TO DECIDE THIS MAIN ISSUE FIRST IN THE SUCCEEDING P ARAGRAPHS. WE TAKE UP ASSESSMENT YEAR 2009-10 INVOLVING ASSESSEES AND RE VENUES RESPECTIVE CROSS APPEALS IT(SS)A NOS. 9 & 21/AHD/2012 AS THE LEAD CA SES. 8. THERE DOES NOT APPEAR TO BE ANY DISPUTE THAT ALL THESE THREE ASSESSEES ARE ASSESSED AS INDIVIDUALS. THE ABOVE DECEASED AS SESSEE SHRI GANDABHAI WAS OWNER IN POSSESSION OF THE AGRICULTURAL LAND CO MPRISED IN BLOCK NO.648, VILL. ADALAJ, DIST. GANDHINAGAR. HE SOLD THE SAME ON 11.08.2008 FOR RS.2.1CRORES COMPRISING OF CHEQUE PAYMENT OF RS.53, 51,519/- AND THE REMAINING SUM INVOLVED CASH COMPONENT. THIS CASE F ILE INDICATES THAT THERE HAS BEEN A LOT OF ISSUE BETWEEN THE PARTIES ABOUT A UTHENTICITY OF ASSESSEES CLAIM OF HAVING RECEIVED THE ABOVE CASH PAYMENT IN VIEW OF THE FACT THAT HIS VENDEES HAD DENIED THE SAME IN THEIR RESPECTIVE DEP OSITIONS. IT IS FURTHER EVIDENT TO US THAT THE ASSESSING OFFICER HAS HIMSEL F ASSESSED THE ABOVE GROSS SUM OF RS.2.1 CRORES FOR THE PURPOSE OF COMPUTING CAPITAL GAINS. HE HOWEVER ADOPTED A DIFFERENT STAND WHILST DEALING WI TH ASSESSEES EXPLANATION REGARDING SOURCE OF THEIR INVESTMENTS I N THE ABOVE ASSETS CATEGORIES ON THE GROUND THAT PURCHASERS/VENDEES HA D NOT SUPPORTED THE CASH IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 6 - COMPONENT VERSION. THE CIT(A)S ORDER UNDER CHALLE NGE OBSERVES THAT SUCH A CONFLICTING APPROACH IS NOT PERMISSIBLE. HE HOLDS THAT THE ASSESSEE HAD AMPLY PROVED TO HAVE RECEIVED TOTAL SALE CONSIDERATION OF RS.2.1 CRORES. THE REVENUES SUBSTANTIVE GROUND NARRATED HEREINABOVE N OWHERE CHALLENGE THIS CLINCHING FINDING. WE THUS INFER THAT THE ASSESSEE HAD IN FACT RECEIVED THE ABOVE GROSS SALE CONSIDERATION OF RS.2.1CRORES IN L IEU OF PARTING WITH HIS TITLE OF HIS LAND SOLD. 9. A PERUSAL OF THESE CASE FILES REVEALS THAT THE D EPARTMENT CARRIED OUT A SEARCH IN SHRI GANDABHAIS CASE ON 15.10.2008. IT WOULD COME ACROSS VARIOUS DOCUMENTS PERTAINING TO PURCHASE OF HIS AGR ICULTURAL LANDS, A CANCELLATION DEED BETWEEN SHRI GANDABHAI AND SHRI H EMENDRA SHAH ALONGWITH OTHER EVIDENCE INDICATING TOWARDS SUBSTAN TIAL INVESTMENTS MADE IN LIC POLICIES, CONSTRUCTION OF HOUSES/TEMPLES AND MO NTHLY INCOME SCHEMES IN THE NAME OF ALL THREE ASSESSEES. WE PAUSE FOR A MO MENT HERE TO CLARIFY THAT SHRI RANJIT V. MAKWANA IS SHRI GANDABHAIS NEPHEW. HE HAD SIGNED THE ABOVE SALE DEED IN CAPACITY OF A CONFIRMING PARTNER . THE DEPARTMENTAL AUTHORITIES INITIATED SECTION 153A PROCEEDINGS. SH RI GANDABHAI FILED HIS RETURN ON 31.03.2010 STATING INCOME OF RS.75012/-. PAGES 1 TO 6 OF THE PAPER BOOK CONTAIN A COPY THEREOF. IT IS EVIDENT THAT TH E ABOVE VENDOR ASSESSEE DID NOT INCLUDE THE ABOVE SALE CONSIDERATION IN HIS RET URN. HE WOULD HOWEVER APPEND A NOTE THERETO STATED TO HAVE SOLD THE IMPUG NED AGRICULTURAL LAND FOLLOWED BY HIS CLAIM THAT THE SAME WAS NOT A CAPIT AL ASSET SO AS TO GIVE RISE TO ANY CAPITAL GAINS. 10. THE ASSESSING OFFICER TOOK UP SCRUTINY. HE IS SUED A SHOW CAUSE NOTICE FOR TREATING THE ABOVE LAND SOLD AS A CAPITA L ASSET U/S.2(14) OF THE ACT. THE ASSESSEE FILED REPLY ON 06.09.2010. HE SUBMITT ED THAT THE LAND SOLD WAS PURELY AN AGRICULTURAL ONE. HIS CASE WAS THAT THE ENTIRE SALE CONSIDERATION OF IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 7 - RS.2.17CRORES (INCLUDING RS.7LACS FORFEITED AMOUNT) WAS EXEMPT AS THE LAND WAS WELL BEYOND A DISTANCE OF 8 & 4 KILOMETERS FROM AHMEDABAD AND GANDHINAGAR MUNICIPALITIES. THE ASSESSEE FURTHER PL EADED THAT HIS VILLAGE POPULATION WAS WELL LESS THAN 10,000 AS PER 2001 CE NSUS. HE ENCLOSED NECESSARY CERTIFICATE AS WELL. THE ASSESSEE WOULD THERAFTER PLACED ON RECORD GOVERNMENT OF INDIAS (FINANCE DEPARTMENT) NOTIFICA TION DATED 06.01.1994 ISSUED U/S.2(14)(III)(B) OF THE ACT SPECIFYING DIST ANCE LIMITS FROM AHMEDABAD AND GANDHINAGAR MUNICIPALITIES TO BE 8 & 4 KILOMETE RS; RESPECTIVELY. THE ASSESSEE ACCORDINGLY CLAIMED THAT THE ABOVE LAND SO LD WAS NOT A CAPITAL ASSET SO AS TO GIVE RISE TO CAPITAL GAINS AS PROPOSED IN ASSESSING OFFICERS SHOW CAUSE NOTICE. 11. WE PROCEED FURTHER TO FIND THAT THE ASSESSING O FFICER THEREAFTER INFORMED THE ASSESSEE THAT HIS LAND WAS WITHIN 8 KI LOMETERS FROM GOTA MUNICIPALITY AS MERGED WITH AHMEDABAD MUNICIPAL COR PORATION IN THE YEAR 2008. HE OPINED THAT ASSESSEES LAND ACCORDINGLY W AS A CAPITAL ASSET U/S.2(14) OF THE ACT AS THE ABOVE DISTANCE HAD TO B E TAKEN FROM ANY MUNICIPALITY AND NOT ONLY THE TWO STATED HEREINABOV E. HE THEREAFTER FRAMED THE IMPUGNED ASSESSMENT ON 29.10.2010 ON THESE VERY LINES TO CONCLUDE THAT THE ABOVE DISTANCE OF 8 KILOMETERS WOULD BE TAKEN F ROM GOTA MUNICIPALITY AS MERGED WITH THE AHMEDABAD MUNICIPAL CORPORATION. H E ACTED ACCORDINGLY TO COMPUTE THE IMPUGNED LONG TERM CAPITAL GAINS. 12. THE ASSESSEE PREFERRED AN APPEAL. THE CIT(A) D IRECTS THE ASSESSING OFFICER TO VERIFY ASSESSEES LANDS DISTANCE FROM AH MEDABAD AND GANDHINAGAR MUNICIPALITIES AND FIND OUT AS TO WHETHER THE SAME IS WITHIN 8 OR 4 KILOMETERS THEREFROM OR NOT AS UNDER: 8. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT. FIRST OF ALL, IT WOULD BE IMPORTANT TO ADJUDICATE WHETHER THE LAND IN QUESTIO N IS A CAPITAL ASSET OR NOT. IF IT IS NOT A CAPITAL ASSET, THEN THE SALE PROCEEDS THER EOF CANNOT BE TAXED UNDER SECTION 45 OF THE INCOME-TAX ACT UNDER THE HEAD OF CAPITAL GAINS. FOR THIS PURPOSE, IT IS IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 8 - NECESSARY TO REFER TO THE DEFINITION OF CAPITAL ASS ET AS MENTIONED IN SECTION 2 (14) (III) OF THE INCOME-TAX ACT. AS PER THIS DEFINITION , THE AGRICULTURAL LAND IS NOT A CAPITAL ASSET IF IT IS NOT SITUATED (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURIS DICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNI CIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A P OPULATION OF NOT LESS THAN TEN THOUSAND ACCORDING TO THE LAST PRECED ING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR; OR (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MOR E THAN EIGHT KILOMETERS, FROM THE LOCAL LIMITS OF ANY MUNICIPALI TY OR CANTONMENT BOARD REFERRED TO IN ITEM (A), AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANIZATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS, SPECIFY IN THIS BEHALF BY NOTIFICAT ION IN THE OFFICIAL GAZETTE 8.1. AS PER THE OFFICIAL SITE OF THE CENSUS INDIA 2 001, THE TOTAL POPULATION OF VILLAGE ADALAJ IN 2001 WAS 9776. THEREFORE, THE POP ULATION OF THE VILLAGE ADALAJ DOES NOT EXCEED 10,000 AS PER THE LAST CENSUS OF 20 01. THE CONDITION REGARDING THE POPULATION EXCEEDING 10,000 IS NOT SATISFIED IN THI S CASE. AS REGARDS THE NEXT CONDITION REGARDING THE DISTANCE FROM THE MUNICIPAL LIMIT, A CERTIFICATE WAS PRODUCED BY THE AR BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS PER WHICH THE DISTANCE FROM THE MUNICIPAL LIMIT OF GANDHINAGAR AND THE VILLAGE ADALAJ IS 9 KM. SIMILARLY A CERTIFICATE FROM THE VI LLAGE PANCHAYAT WAS PRODUCED BEFORE THE AO AS PER WHICH THE DISTANCE BETWEEN THE VILLAGE AND THE MUNICIPAL LIMIT OF AHMEDABAD IS 9 KM. IN OTHER WORDS, ACCORDI NG TO THE APPELLANT, THE LAND IN QUESTION IN VILLAGE ADALAJ IS NOT CAPITAL ASSET AS BOTH THE CONDITIONS OF POPULATION EXCEEDING 10,000 AND THE DISTANCE EXCEEDING 8 KM AR E APPLICABLE IN HIS CASE. HOWEVER, THE AO DID NOT BELIEVE THE CERTIFICATE PRO DUCED BY THE APPELLANT FROM THE VILLAGE PANCHAYAT AND HELD THAT SINCE THE DISTANCE FROM THE GOTA MUNICIPALITY TO VILLAGE ADALAJ IS LESS THAN 8 KM, THE AGRICULTURAL LAND IN QUESTION IS A CAPITAL ASSET. BEFORE ME ALSO THE AR RELIED UPON THE CERTIFICATES OF GRAM PANCHAYAT REGARDING THE DISTANCE FROM THEMUNICIPAL LIMIT OF AHMEDABAD A ND GANDHINAGAR FROM THE VILLAGE ADALAJ. IT WAS ALSO .CONTENDED BY THE AR TH AT SINCE THE LAND IS SITUATED AT VILLAGE ADALAJ WHICH FALLS UNDER THE JURISDICTION O F DISTRICT GANDHINAGAR, THE: DISTANCE FROM THE MUNICIPAL LIMIT OF GANDHINAGAR TO ADALAJ ONLY IS TO BE SEEN. IT WAS STATED THAT SINCE THE GOVERNMENT OF INDIA HAS N OTIFIED THE DISTANCE FROM THE MUNICIPAL LIMIT OF GANDHINAGAR AT 4 KMS AND THE DIS TANCE OF THE VILLAGE ADALAJ IS MORE THAN 4 KM FROM THE MUNICIPAL LIMIT OF GANDHINA GAR, THE LAND IN QUESTION IS NOT A CAPITAL ASSET. FOR THIS PURPOSE, RELIANCE WAS PLACED ON THE DECISION OF DC1T VS. CAPITAL LOCAL AREA BANK LTD (2009) 29 SOT 394 / 6 ITR (TRIB) 314 (AMRITSAR). 8.2. THE-PROVISIONS OF SECTION2 (14) (III) WERE-INS ERTED BY THE FINANCE ACT 1970. IN THE CIRCULAR HO. 45 DATED 02-09-1970, THE C.B.D. T HAS CLARIFIED THAT LAND WHICH ARE SITUATED IN A VILLAGE WITH POPULATION BELOW 100 00 AND ALSO BEYOND THE DISTANCE NOTIFIED BY THE CENTRAL GOVERNMENT FROM TH E LIMITS OF ANY SUCH IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 9 - MUNICIPALITY OR CANTONMENT BOARD; WILL NOT BE COVER ED UNDER THE DEFINITION OF CAPITAL ASSET. FOR THE SAKE OF BREVITY RELEVANT POR TION OF THE CIRCULAR IS REPRODUCED AS UNDER: '30. PRIOR TO THE AMENDMENT MADE BY THE FINANCE ACT , 1970, THE DEFINITION-OF THE TERM 'CAPITAL ASSET' IN SECTION 2(14) EXCLUDED FROM ITS SCOPE, INTER ALIA, AGRICULTURAL LAND IN INDIA. ACCORDINGLY, NO LIABILI TY TO TAX AROSE ON GAINS DERIVED FROM TRANSFER OF AGRICULTURAL LAND IN INDIA. THIS E XEMPTION OF AGRICULTURAL LAND FROM THE SCOPE OF LEVY OF TAX ON CAPITAL GAINS HAS A HISTORICAL ORIGIN AND IS NOT DUE TO ANY BAR IN THE CONSTITUTION ON THE COMPETENCE OF PARLIAMENT TO LEGISLATE FOR SUCH LEVY. AGRICULTURAL LAND SITUATED IN MUNICIPAL AND OTHER URBAN AREAS IS ESSENTIALLY SIMILAR TO NON-AGRICULTURAL LAND IN SUC H AREAS IN ITS POTENTIALITIES FOR USE DUE TO THE PROGRESS OF URBANISATION AND INDUSTR IALISATION. THE FINANCE ACT, 1970 HAS, ACCORDINGLY, AMENDED THE RELEVANT PROVISI ONS OF THE INCOME-TAX ACT SO AS TO BRING WITHIN THE SCOPE OF TAXATION CAPITAL GA INS ARISING FROM THE TRANSFER OF AGRICULTURAL LAND SITUATED IN CERTAIN AREAS. FOR TH IS PURPOSE, THE DEFINITION OF THE TERM 'CAPITAL ASSET' IN SECTION 2(14) HAS BEEN AMEN DED SO AS TO EXCLUDE FROM ITS SCOPE ONLY AGRICULTURAL LAND IN INDIA WHICH IS NOT SITUATE IN ANY AREA COMPRISED WITHIN THE JURISDICTION OF A MUNICIPALITY OR CANTON MENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND PERSONS AC CORDING TO THE LAST PRECEDING CENSUS FOR WHICH THE RELEVANT FIGURES HAVE BEEN PUB LISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR. THE CENTRAL-GOVERNMENT HAS BEEN AUTHORISED TO NOTIF Y IN THE OFFICIAL GAZETTE ANY AREA OUTSIDE THE LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD HAVING A POPULATION OF NOT LESS THAN TEN THOU SAND UP TO A MAXIMUM DISTANCE OF 8 KILOMETRES FROM SUCH LIMITS, FOR THE PURPOSES OF THIS PROVISION. SUCH NOTIFICATION WILL BE ISSUED BY THE. CENTRAL GOVERNM ENT, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANISATION OF SUCH AREA, ARID, WHEN ANY SUCH AREA IS NOTIFIED BY THE CENTRAL GOVERNMENT, AGRICULTURAL LAND SITUAT ED WITHIN SUCH AREA .WILL STAND INCLUDED WITHIN THE TERM 'CAPITAL ASSET' AGRICULTURAL LAND SITUATED IN RURAL AREAS, I.E., AREAS OUTSIDE ANY MUNICIPALITY OR CANTONMENT BOARD HAVING A POPULATION OF NOT LESS THAN TEN THOUSAND AND ALSO BEYOND THE DIST ANCE NOTIFIED BY THE CENTRAL GOVERNMENT FROM THE LIMITS OF ANY SUCH MUNICIPALITY OR CANTONMENT BOARD, WILL CONTINUE TO BE EXCLUDED FROM THE TERM 'CAPITAL ASSE T'. 8.3. IN MY OPINION, THE CIRCULAR WAS ISSUED BY THE CBDT EXPLAINING THE PROVISIONS OF THE AMENDMENTS MADE BY THE FINANCE ACT, 1970 IN THE DEFINITION OF CAPITAL ASSET UNDER SECTION 2(14) HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANIZATION OF RURAL AREAS. IF THAT AREA FALLS WITHIN THE PRESCRIB ED LIMIT OF THE DISTANCE FROM ANY MUNICIPALITY, IN THAT CASE ALSO, THE AGRICULTURAL L AND WILL BE TREATED AS CAPITAL ASSET. FOR EXAMPLE, AN AGRICULTURAL LAND IN DAHISAR (FALLING UNDER THE DISTRICT OF THANE, MAHARASHTRA) WHICH IS WITHIN 8 KM FROM THE M UNICIPAL LIMIT OF MUMBAI WILL BE TREATED A CAPITAL ASSET BECAUSE IT IS WITHI N 8 KM FROM THE MUNICIPAL LIMIT, OF MUMBAI. THE CONTENTION OF THE APPELLANT THAT SINCE THE AGRICULTURAL LAND FALLS UNDER THE JURISDICTION OF DISTRICT THANE WHICH IS M ORE THAN 20 KM AWAY FROM THE MUNICIPAL LIMITS OF THANE, THEREFORE, IT CANNOT BE TREATED AS CAPITAL ASSET, CANNOT BE ACCEPTED BY ME BECAUSE THE INTENTION OF THE LEGI SLATURES IS TO BRING SUCH LAND UNDER THE AMBIT OF TAXATION, IN THE VICINITY OF WHI CH THE URBANISATION HAS TAKEN PLACE. THEREFORE, IF THE AGRICULTURAL LAND IS WITHI N THE DISTANCE OF 8 KM FROM THE MUNICIPAL LIMIT OF MUMBAI, THEN ALSO THE LAND FALLI NG UNDER THE DISTRICT OF THANE WILL HAVE TO BE TREATED AS CAPITAL ASSET. IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 10 - 8.4. THE AO IS THEREFORE DIRECTED TO VERIFY THE ACTUAL D ISTANCE BETWEEN THE MUNICIPAL LIMIT OF AHMEDABAD OR THE MUNICIPAL LIMIT OF GANDHINAGAR (AS ON THE DATE OF THE SALE OF THE LAND) AND THE LAND SITUATED IN VILLAGE ADALAJ. IF IT IS WITHIN 8 KM FROM THE MUNICIPAL LIMIT OF AHMEDABAD OR WITHI N 4 KM FROM THE MUNICIPAL LIMIT OF GANDHINAGAR, THEN IT WOULD BE TREATED AS C APITAL ASSET. OTHERWISE, IT CANNOT BE TREATED AS CAPITAL ASSET. IF IT IS A CAPITAL ASSET, THEN ONLY THE SALE PROCEEDS THEREOF WILL BE SUBJECT TO CAPITAL GAINS. IF THE DISTANCE IS MORE THAN 8 KM FROM, THE MUNICIPAL LIMIT OF AHMEDABAD AND ALSO 4 K M FROM THE MUNICIPAL LIMIT OF GANDHINAGAR, THEN ONLY IT CANNOT BE TREATED AS A CA PITAL ASSET AND THE SALE OF THE AGRICULTURAL LAND CANNOT BE TAXED UNDER THE HEAD OF CAPITAL GAINS. THIS LEAVES BOTH PARTIES AGGRIEVED. 13. WE HAVE BOTH THE LEARNED REPRESENTATIVES. CASE FILE PERUSED. THERE IS NO DISPUTE AS INDICATED HEREINABOVE THAT ASSESSEES LAND SOLD IS SITUATED IN VILL. ADALAJ, DISTT. GANDHINAGAR. HE SUBMITS THAT THE ABOVE LAND IS ADMITTEDLY SITUATED AT LEAST AT A DISTANCE OF MORE THAN 8 AND 4 KILOMETERS FROM AHMEDABAD AND GANDHINAGAR MUNICIPALITIES. HE QUOTE S BEFORE US GOVERNMENTS NOTIFICATION DATED 06.01.1994 (SUPRA) STATED TO BE THE MOST CRUCIAL EVIDENCE TO CONTEND THAT DISTANCE BETWEEN H IS LAND AND THE ABOVE TWO MUNICIPALITIES IS TO BE SEEN AS ON THE SAID DATE AN D NOT IN VIEW OF THE SUBSEQUENT EVENTS. REVENUES ARGUMENT ON THE OTHER HAND SUPPORTS ASSESSING OFFICERS OPINION TAKING INTO ACCOUNT THE FACT THAT ASSESSEES LAND CAME WITHIN 8 KILOMETERS DISTANCE FROM GOTA MUNICIP ALITY WHICH STOOD MERGED WITH THE AHMEDABAD MUNICIPAL CORPORATION IN THE YEAR 2008 RELEVANT TO EXECUTION OF THE IMPUGNED SALE DEED. WE REPEAT AT THIS STAGE THAT THE CIT(A) HAS ADMITTEDLY SET ASIDE THE ISSUE BACK TO T HE ASSESSING OFFICER. WE FIND THE SAME TO BE NO MORE SUSTAINABLE AS PER NECE SSARY AMENDMENT CARRIED OUT IN SECTION 251(1)(A) OF THE ACT AS AMENDED W.E. F. 01.06.2001 VIDE FINANCE ACT, 2001 TAKING AWAY SUCH AN OPTION. WE T HUS SEE NO REASON TO CONCUR WITH THE CIT(A)S DIRECTIONS TO THE ASSESSIN G OFFICER IN PRINCIPLE. 14. WE FURTHER FIND THAT THE ABOVE NOTIFICATION DAT ED 06.01.1994 CONTAINS EXPLANATION 2 SPECIFICALLY STATING THAT REFERENCE T O VARIOUS MUNICIPALITIES IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 11 - THEREIN (INCLUDING AHMEDABAD AND GANDHINAGAR) IS TO THE LIMITS AS EXISTING ON THE DATE OF NOTIFICATION I.E. 06.01.1994. BOTH THE LEARNED REPRESENTATIVES AGREE THAT LIMITS OF THESE TWO MUNICIPALITIES REMAI N UNCHANGED UP TO THE YEAR 2008 WHICH SAW GOTA MUNICIPALITY MERGER WITH AHMEDA BAD MUNICIPAL CORPORATION. WE NOTICE IN THIS BACKDROP THAT A CO- ORDINATE BENCH OF THE TRIBUNAL IN ITO VS. AKASDEEP FIRMS PVT. LTD. ITA NO S. 2138 & 2564/AHD/2012 DECIDED ON 11.08.2015 TAKES INTO ACCO UNT THE VERY NOTIFICATION TO CONCLUDE THAT SUBSEQUENT MODIFICATI ON IN MUNICIPAL BOUNDARIES WOULD NOT ENLARGE SCOPE OF THE SAID NOTI FICATION. IT FURTHER HOLDS THAT DISTANCE OF THE LAND SOLD IS TO BE SEEN IN VIE W OF THE DATE MENTIONED IN THE ABOVE NOTIFICATION ONLY I.E. 06.01.1994. WE TH US FIND NO REASON TO AGREE WITH THE REVENUES ARGUMENT SUPPORTING ASSESSING OF FICERS STAND SINCE GOTA MUNICIPALITY HAS NOWHERE BEEN SPECIFICALLY MEN TIONED IN THE ABOVE NOTIFICATION. THE REVENUES STAND IS THEREFORE DEC LINED. 15. NEXT COMES ASSESSEES ARGUMENT THAT HIS LAND SO LD IS ADMITTEDLY WELL BEYOND A DISTANCE OF 8 & 4 KILOMETERS FROM AHMEDABA D AND GANDHINAGAR MUNICIPALITIES. WE FIND THAT HE DRAWS SUPPORT FROM TALATI CERTIFICATES TO THIS EFFECT. A PERUSAL THEREOF REVEALS THAT THE SAME IS WITHOUT ANY COGENT MATERIAL WHICH COULD FORM THE BASIS OF SUCH A DISTANCE MEASU REMENT. WE OBSERVE IN OTHER WORDS THAT THESE CERTIFICATES OUGHT TO HAVE B EEN ENCLOSED ALONG WITH THE NECESSARY REVENUE DOCUMENTATION AND OTHER RELEVANT MATERIAL PROVING THAT SURFACE DISTANCE BETWEEN THE LAND SOLD AND THE TWO MUNICIPALITIES WAS WELL BEYOND THE SPECIFIED DISTANCE OF 8 & 4 KILOMETERS. WE ARE OF THE OPINION IN THESE PECULIAR FACTS THAT THE CIT(A) HAS CHOSEN TO DIRECT THE ASSESSING OFFICER TO VERIFY THE DISTANCE IN QUESTION. WE HAVE ALREADY OPINED THAT THE SAME IS NOT PERMISSIBLE. WE HOWEVER ARE FURTHER OF THE VIEW THAT SINCE THERE IS NO ERROR ON MERITS IN THE LOWER APPELLATE DIRECTIONS, WE OURSEL VES ADOPT THE SAME APPROACH TO REMIT THE ISSUE BACK TO THE ASSESSING AUTHORITY TO VERIFY ASSESSEES LANDS IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 12 - DISTANCE VIS--VIS THE TWO MUNICIPALITIES HEREINABO VE AS IT EXISTED AS PER 1994 NOTIFICATION (SUPRA). NEEDLESS TO SAY, IF HE FINDS THE SAME TO BE SITUATED AT A DISTANCE OF LESS THAN 8 & 4 KILOMETERS FROM AHMEDAB AD OR GANDHINAGAR MUNICIPAL LIMITS, ASSESSEES LAND SOLD WOULD BE TRE ATED AS A CAPITAL ASSET U/S.2(14) OF THE ACT. WE ACCORDINGLY ACCEPT ASSESS EES SECOND SUBSTANTIVE GROUND IN ASSESSEES AS WELL AS REVENUES APPEAL FO R STATISTICAL PURPOSES AS INDICATED HEREINABOVE. 16. WE NOW MOVE ON TO ASSESSEES FIRST SUBSTANTIVE GROUND CHALLENGING BOTH THE LOWER AUTHORITIES ACTION IN ADDING UNEXPLA INED INVESTMENTS IN ASSETS OF RS.23,23,950/-. WE FIND THAT THE ABOVE AGGREGAT E FIGURE INVOLVES THE FOLLOWING HEADS: DATE NAME OF ASSET AMOUNT 05/04/2008 CONSTRUCTION OF HOUSE AND TEMPLE RS.1,00 ,000/- 05/04/2008 CONSTRUCTION OF HOUSE AND TEMPLE RS.2,00,000/- 05/04/2008 CONSTRUCTION OF HOUSE AND TEMPLE RS.1,50,000/- 26/05/2008 PURCHASE OF LAND RS.15,00,000/- 01/07/2008 CONSTRUCTION OF HOUSE AND TEMPLE RS.1,00,000/- 08/09/2008 STAMP EXPENSES KADI LAND RS.73,950/- 15/10/2008 BROKERAGE RS.2,00,000/- TOTAL RS.23,23,950/- 17. THE ASSESSEES CASE BEFORE THE ASSESSING OFFICE R WAS THAT ALL THESE INVESTMENTS CAME FROM THE ABOVE CASH COMPONENT OF R S.1.57 CRORES. THE ASSESSING OFFICER DECLINED THE SAME BY OBSERVING TH AT HIS VENDEES HAD DENIED TO HAVE PAID ANY CASH COMPONENT. HE WOULD A CCORDINGLY TREAT ALL THESE HEADS AS UNEXPLAINED INVESTMENT. 18. THE CIT(A) FIRST OF ALL DISCUSES ALL SEARCH STA TEMENT MADE BY ASSESSEES FAMILY MEMBERS. HE THEREAFTER PREPARES A CASH FLOW STATEMENT TO UPHOLD THE IMPUGNED ADDITION AS UNDER: 9.3 LOOKING AT THE CIRCUMSTANCES OF THE CASE THAT THE APPELLANTS ARE BASICALLY AGRICULTURIST AND THAT THEY HAVE NO OTHER SOURCE OF INCOME, BROADLY THE INVESTMENTS MADE BY THEM IN THE CONSTRUCTION OF HOUSE AND TEMPL E, PURCHASE OF NEW LAND AND IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 13 - INVESTMENT IN LIC AND MIS HAS TO BE ACCEPTED AS MAD E OUT OF THE SALE PROCEEDS OF THE LAND PROVIDED THEY HAVE SUFFICIENT FUNDS AS ON THE DATE OF MAKING THE INVESTMENTS. FOR THIS PURPOSE, IT WOULD BE RELEVANT TO REFER TO THE CASH FLOW STATEMENT AND THE INVESTMENTS MADE BY THE APPELLANT WHICH WERE SUBMITTED BEFORE THE AO AS UNDER: SHRL GANDABHAI AMBARAM MAKWANA / THAKOR DETAILS OF INVESTMENTS - DATE WISE DATE PARTICULARS AMOUNT 02-07-2007 INVESTMENT IN MIS 195000 MIS - 65325 (SENDHAJI G. THAKOR) 16-11-2007 BEING THE AMOUNT PAID TO DEEPKAMAL BAJAJ -NEW AUTO RICKSHAW PURCHASED IN THE NAME OF SENDHAJI MAKWANA 115280 16-11-2007 BEING THE AMOUNT PAID TO DEEPKAMAL BAJAJ -NEW AUTO RICKSHAW PURCHASED IN THE NAME OF RANJIT V. MAKWANA 129500 27-11-2007 OTHER ASSESSORIES PURCHASED 7720 02-01-2008 INVESTMENT IN MIS 300000 MIS - 65629 (SENDHAJI G. THAKOR 02-01-2008 INVESTMENT IN MIS 300000 MIS - 65630 (RANJIT V. THAKOR) 03-01-2008 195000 INVESTMENT IN LIC (FROM 03-01- 08 TO 28-01-08) 2950000 LIC - GANDAJI A. MAKWANA 03-01-2008 INVESTMENT IN LIC (FROM 03-01-08 TO 28-01-08) 2800000 LIC - SENDHAJI G MAKWANA 03-01-2008 INVESTMENT IN LIC (FROM 03-01-08 TO 28-01-08) 3100000 LIC - RANJIT MAKWANA 04-01-2008 INVESTMENT IN LIC (FROM 04-01-08 TO 28-01-08) 2750000 LIC - DINESH V. MAKWANA 24-01-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 11000 24-01-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 100000 05-02-2008 INVESTMENT IN MIS 300000 MIS - 65704 (MEENABEN SENDHAJI) 19-02-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 200000 IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 14 - 19-02-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 25000 09-03-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 150000 15-03-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 100000 05-04-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 100000 05-04-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 200000 05-04-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES 150000 23-04-2008 BEING THE AMOUNT PAID TO NANDA AUTOMOBILES BIKE PURCHASED IN THE NAME OF SENDHAJI MAKWANA 46460 05-05-2008 BEING THE AMOUNT PAID TO NANDA AUTOMOBILES BIKE PURCHASED IN THE NAME OF RANJIT V MAKWANA 46460 05-05-2008 OTHER ASSESSORIES PURCHASED 7080 26-05-2008 BEING CASH PAID FOR PURCHASE OF KADI LAND 1500000 01-07-2008 BEING PAID TO PRAKASHBHAI CONTRACTOR FOR CONST. OF HOUSES AND TEMPLES - A-2 PG-1 100000 08-09-2008 STAMP EXP RS. 44800/- AND REG. EXP. RS. 291 50/-LAN DAT.KADI 73950 15-10-2008 DALALI PAID TO JAYANTIBHAI 200000 TOTAL 15957450 SALE VALUE BLOCK 648 ADALAJ 21000000 DOCUMENT VALUE BY CHQ -5351519 ADVANCE FROM HEMENDRA L. SHAH 700000 TOTAL CASH COLLECTION 16348481 CASH BALANCE ON HAND 391031 9.4. FROM THE ABOVE CHART, IT IS CLEAR THAT THE APP ELLANT HAS MADE TOTAL INVESTMENT OF RS.4.50 LACS DURING THE PERIOD 2/7/2007 TO 27/11 /2007. THIS INVESTMENT WAS STATED TO HAVE BEEN MADE OUT OF THE AMOUNT OF RS.7L ACS RECEIVED BY THE APPELLANT AT THE TIME OF BANAKHAT OF THE LAND WITH SHRI HEMEN DRA SHAH. THE BALANCE INVESTMENT DURING THE PERIOD 2/1/2008 TO 15/10/2008 WERE STATED TO HAVE BEEN MADE BY THE APPELLANT OUT OF THE SALE PROCEEDS OF R S.2.10 CRORES. IT MAY BE MENTIONED THAT THE LAND IN QUESTION WAS SOLD TO SHR I HEMENDRA SHAH FOR RS.57,28,350 VIDE THE REGISTERED DEED DATED 27/9/20 07 WHICH WAS SIGNED BY SHRI IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 15 - ABBASBHAI MALIK, THE BROKER ON BEHALF OF THE APPELL ANT. THE DEED WAS CANCELLED SUBSEQUENTLY IN JUNE 2008 AFTER THE APPELLANT OBJEC TED TO THE TITLE CLEARANCE THROUGH HIS ADVOCATE SHRI R.K PRAJAPATI ON 9/5/2008 . THEREFORE, IT IS EXPECTED THAT THE APPELLANT WOULD HAVE GOT RS.71AKH AT THE TIME O F BANAKHAT OF THE LAND IN THE MONTH OF JULY 2007. THEREFORE, THE INVESTMENT OF RS .4.50 LACS MADE BY THE APPELLANT DURING THE PERIOD JULY 2007 TO NOVEMBER 2 007 CAN BE EXPLAINED OUT OF THE AMOUNT OF RS.7LACS RECEIVED BY THE APPELLANT AT THE TIME OF BANAKHAT OF THE LAND. 9.5. AS REGARDS THE INVESTMENTS MADE BY THE APPELLA NT DURING THE PERIOD JANUARY 2008 TO OCTOBER 2008, THE SAME WAS STATED T O HAVE BEEN MADE OUT OF THE TOTAL SALE CONSIDERATION OF RS.2.10 CRORES RECEIVED BY THE APPELLANT FROM THE BUYERS OF THE LAND NAMELY SHRI MANIBHAI PATEL, ASHOK C MOD Y, RAJULBEN DOSHI, SENDHABHAI DESAI AND OTHERS. IT MAY BE MENTIONED TH AT, THE AO DID NOT ACCEPT THE CONTENTION OF THE APPELLANT THAT THE INVESTMENT IN THE VARIOUS ASSETS AS MENTIONED ABOVE IN-THE CHART, HAVE BEEN MADE BY THE APPELLANT OUT OF THE SALE PROCEEDS OF THE LAND OF RS.2.10 CRORES, ON THE GROUND THAT THE APPE LLANT HAD NOT FURNISHED THE CONFIRMATION FROM THE BUYERS OF THE LAND THAT THEY HAD PAID CASH OF RS. 1.57 CRORES OVER AND ABOVE THE CHEQUE AMOUNT OF RS.53 LACS TO T HE APPELLANT. AT THE SAME TIME, THE SAME AO HAS ALSO MADE THE ADDITION OF THE CASH COMPONENT PAID BY THE BUYERS OF THE LAND. THEREFORE, ON THE ONE HAND, THE AO HAS ACCEPTED IN THE CASE OF THE BUYERS THAT THE CASH AMOUNT HAS BEEN PAID BY TH E BUYERS OF THE LAND FOR THE PURCHASE OF THE LAND FROM THE APPELLANTS WHEREAS, O N THE OTHER HAND, IN THE CASE OF THE SELLERS HE DOES NOT ACCEPT THAT THE CASH HAS BE EN RECEIVED BY THE APPELLANTS FROM THE BUYERS OF THE LAND. THIS STAND OF THE AO C ANNOT BE ACCEPTED BY ME. THE AO CANNOT ADOPT DIFFERENT YARDSTICKS IN THE CASE OF BUYERS AND SELLERS. IN VIEW OF THE STATEMENTS RECORDED AT THE TIME OF SEARCH OF TH E APPELLANT AND; HIS FAMILY MEMBERS AS WELL AS THE BROKER OF THE SELLERS, I HAV E NO HESITATION IN MY MIND IN HOLDING THAT THE INVESTMENT IN CONSTRUCTION OF HOUS E AND TEMPLES, PURCHASE OF BIKES, PURCHASE OF LAND AT KADI, INVESTMENT IN LIC AND MIS ETC. ARE MADE OUT OF THE SALE PROCEEDS OF THE LAND. 9.6. HOWEVER, THE APPELLANT SHRI GANDABHAI MAKWANA AND OTHER FAMILY MEMBERS HAD STATED THAT AN AMOUNT OF RS.35 LAKH WAS RECEIVE D IN CASH AT THE TIME OF DASTAVEJ. IN OTHER WORDS, CASH OF RS.35 LACS WAS RE CEIVED BY THEM FROM THE 'BUYERS OF THE LAND AT THE TIME OF SIGNING THE AGRE EMENT ON 11/8/2008. THE BALANCE AMOUNT OF RS.122 LACS IN CASH WAS RECEIVED BY THEM BEFORE SIGNING THE AGREEMENT. ON THE PERUSAL OF THE INVESTMENTS MADE BY THE APPEL LANT AND HIS FAMILY MEMBERS, IT IS NOTICED THAT TILL 1/7/2008, THE TOTAL INVESTMENT S MADE BY THE APPELLANT AND HIS FAMILY MEMBERS COMES TO RS. 157,57,450. IF THE ONLY SOURCE OF INVESTMENT IN THE ABOVE MENTIONED ASSETS IS THE SALE PROCEEDS OF THE LAND AND OUT OF THE TOTAL SALE PROCEEDS OF R$. 2.10 CRORES, THE APPELLANTS HAVE RE CEIVED THE CASH OF RS.35 LACS AND THE CHEQUE AMOUNT OF RS.53 LACS AT THE TIME OF SIGNING OF THE AGREEMENT, THEN THEY HAD RECEIVED THE BALANCE AMOUNT OF RS. 1.22 CR ORES UP TO 1/7/2008. WHEREAS, AS PER THE INVESTMENT CHART OF THE APPELLANT, THE T OTAL INVESTMENT MADE BY THEM IS .RS. 157,57450. THIS MEANS, THE EXCESS INVESTMENT TO THE EXTENT-OF RS.35:57 LACS IS NOT EXPLAINED. AS MENTIONED THE APPELLANT CAN BE GIVEN THE BENEFIT OF RS.7 LAKH CLAIMED TO HAVE BEEN RECEIVED FROM SHRI HEMENDRA SH AH AS FORFEITURE OF THE ADVANCES. THE BALANCE AMOUNT OF RS.28.57 LACS, IN M Y VIEW, REMAINS UNEXPLAINED. EXCEPT FOR THIS ADDITION OF RS.28.57 LACS ALL OTHER INVESTMENTS MADE BY THE IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 16 - APPELLANT AND HIS FAMILY MEMBERS ARE PROPERLY EXPLA INED. IN OTHER WORDS, ON THE GROUND OF INVESTMENTS, ADDITION OF RS.28.57 LAKHS O NLY IS SUSTAINED AND THE BALANCE ADDITIONS ARE DIRECTED TO BE DELETED. 9.7. NOW THE QUESTION IS IN WHOSE HAND THE INVESTME NT OF RS.28.57 LACS IS TO BE TREATED AS UNACCOUNTED. THE CONTENTION OF THE APPEL LANT WAS THAT THE LAND IN QUESTION WAS IN THE JOINT NAMES OF THE FAMILY MEMBE RS OF SHRI GANDABHAI MAKWANA, WHEREAS, THE CASE OF THE AO IS THAT THE LA ND STANDS IN THE NAME OF ONLY SHRI GANDABHAI MAKWANA AND NOT OTHER FAMILY MEMBERS . IN THIS CONNECTION, THE AR WAS ASKED TO PRODUCE BEFORE ME THE EVIDENCE THAT THE LAND IN QUESTION WAS HELD JOINTLY BY THE FAMILY MEMBERS OF SHRI GANDABHAI MAK WANA. THE HACK PATRAK PRODUCED BEFORE THE AO ALSO SHOWS THE NAME OF SHRI GANDABHAI MAKWANA ONLY. FURTHER, THE SALE DEED WAS .ALSO EXECUTED BY SHRI G ANDABHAI MAKWANA ALONE. EVEN IF THE LAND WAS ANCESTRAL, THE AR COULD NOT PR ODUCE THAT THE LAND WAS JOINTLY HELD BY OTHER FAMILY MEMBERS ALSO. IT IS LIKELY THA T OTHER FAMILY MEMBERS MIGHT HAVE TRANSFERRED THEIR RIGHTS IN FAVOUR OF SHRI GAN DABHAI MAKWANA AND THEREFORE, THE NAME OF OTHER FAMILY MEMBERS IS NOT APPEARING I N THE RECORDS OF LAND REVENUE. THEREFORE, I ALSO HOLD THAT THE LAND WAS OWNED BY S HRI GANDABHAI MAKWANA ALONE AND THE SALE PROCEEDS THEREOF WAS UTILISED BY HIM I N ACQUIRING OTHER ASSETS SUCH AS LIC POLICY, MIS, CONSTRUCTION OF HOUSE AND TEMPLE E TC. IN THE NAME OF OTHER FAMILY MEMBERS. THE UNACCOUNTED INVESTMENT IS THEREFORE; T O BE CONSIDERED IN THE HANDS OF SHRI GANDABHAI MAKWANA. ACCORDINGLY, THE INVESTM ENTS TO THE EXTENT OF RS.28.57 LACS MADE BY HIM ( IN ASSESSMENT YEAR 2009 -10 OF RS.23,23,950 AND THE BALANCE AMOUNT OF RS.5.33-LACS IN ASSESSMENT YEAR 2 008-09) IS TREATED AS UNEXPLAINED. THE ADDITIONS ON ACCOUNT OF INVESTMENT S MADE BY THE AO IN THE FOLLOWING ASSESSMENT YEARS ARE DIRECTED TO BE DELET ED: 1. LATE SHRI GANDABHAI MAKWANA RS. 37,31,000- 5.33 LACS = RS. 31.98 LACS ASSESSMENT YEAR 2008-09. 2. SHRI SENDHABHAI G MAKWANA RS.35,15,280 IN AS SESSMENT YEAR 2008-09 AND RS.46,460 IN ASSESSMENT YEAR 2009-10. 3. SHRI RANJIT V MAKWANA RS. 53,540 IN ASS ESSMENT YEAR 2009-10 AND RS.35,37,220 IN ASSESSMENT YEAR 2008-09. 10. IN OTHER WORDS, THE APPEAL IN THE CASE OF LATE SHRI GANDABHAI MAKWANA IN ASSESSMENT YEAR 2008-09 IS PARTLY ALLOWED AND THE A PPEALS OF SHRI SENDHABHAI G MAKWANA IN ASSESSMENT YEAR 2008-09 AND ASSESSMENT Y EAR 2009-10 AND SHRI RANJ IT V. MAKWANA IN ASSESSMENT YEAR 2008-09 AND 2009-1 0 ARE ALLOWED. 19. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEES ONLY SUBMISSION BEFORE US IS THAT THE AUTHORITIES BELOW NOWHERE APPRECIATE THE FACT THAT HE HAS BEEN A FARMER SINCE LONG DERIVING INCOME FROM AGRICULTURE AND DAIRY FARMING. HE FURTHER CONTENDS THAT THERE ARE OTHER SOURCES OF IN COME I.E. PASSENGER VEHICLES AND OTHER FARM WORKS. SHRI PATEL AT THIS STAGE STR ONGLY SUPPORTS BOTH THE IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 17 - LOWER AUTHORITIES ACTION. HE STATES THAT THE ASSES SEE OUGHT TO HAVE PLACED ON RECORD ALL NECESSARY DETAILS IN SUPPORT OF THE ABOV E CONTENTION. HE HOWEVER IS UNABLE TO DISPEL ASSESSEES FUNDAMENTAL CONTENTI ON THAT HE HAS BEEN A FARMER SINCE LONG WHO HAS ADMITTEDLY SOLD HIS AGRIC ULTURAL LANDS IN QUESTION TOTALLING TO 14 BIGHAS. IT IS EVIDENT TO US THAT T HE THIRD ASSESSEE SHRI RANJIT MAKWANA HAS ALSO CLAIMED TO BE OWNER OF HALF SHARE ON THE ABOVE LAND WHO HAS SIGNED THE SALE DEED AS A CONFIRMING PARTY. IT THUS EMANATES THAT SHRI GANDABHAI WAS OWNER IN POSSESSION OF 7 BIGHAS AGRIC ULTURAL LAND WHICH WAS SOLD IN THE MIDST OF THE RELEVANT PREVIOUS YEAR I.E . SEPTEMBER 2008. WE THUS ADOPT ESTIMATION METHOD IN THE LARGER INTEREST OF JUSTICE TO CONCLUDE THAT THE ASSESSEE MUST HAVE EARNED AROUND A SUM OF RS.2.5LAC S FROM ALL THE ABOVE SOURCES. IT IS MADE CLEAR THAT OUR ESTIMATION SHAL L NOT BE TREATED AS A PRECEDENT. WE ACCORDINGLY CONFIRM THE IMPUGNED ADD ITION OF RS.23,23,950/- TO RS.20,73,950/- AND GRANT THE ABOVE RELIEF OF RS. 2.5LACS TO THE ASSESSEE. THIS FIRST SUBSTANTIVE GROUND IS PARTLY ACCEPTED. 20. THE ASSESSEES THIRD SUBSTANTIVE GROUND PLEADS THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN OBSERVING THAT IF THE LAND IN QUESTION IS NOT A CAPITAL ASSET, THE ABOVE FORFEITED AMOUNT OF RS.7LA CS WOULD BE TREATED AS HIS INCOME LIABLE TO TAX U/S.5 OF THE ACT. THERE IS NO T DISPUTE THAT THE ASSESSEE HAS FORFEITED THE ABOVE SUM PERTAINING TO THE LAND IN QUESTION. THERE IS FURTHER NO ISSUE THAT HIS LANDS ARE AGRICULTURAL. WE OBSERVE IN THESE FACTS THAT THERE IS NO REASON FOR US TO AGREE WITH THE CIT(A) S DIRECTION HEREINABOVE THAT THE ABOVE SUM OF RS.7LACS WOULD BE TAXED AS INCOME U/S.5 OF THE ACT IN SPITE OF THE FACT THAT THE LAND SOLD IS NOT A CAPITAL ASS ET U/S.2(14) OF THE ACT. SHRI PATEL FAILS TO TAKE US TO ANY SPECIFIC PROVISION IN THE ACT PROVIDING FOR TAXATION OF SUCH AN AMOUNT INVOLVING SALE OF EXEMPT AGRICULTURAL LAND. WE THUS ACCEPT ASSESSEES THIRD SUBSTANTIVE GROUND. L D. COUNSEL REPRESENTING ASSESSEE AT THIS STAGE POINTS OUT THAT REVENUES SU BSTANTIVE GROUND NO.4 IS IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 18 - ALSO A CONNECTED ONE SINCE PLEADING THAT THE ABOVE SUM OF RS.7LACS IS NON REFUNDABLE. WE QUOTE OUR DISCUSSION HEREINABOVE TO DECLINE THE SAME. THE ASSESSEES APPEAL IT(SS)A NO.09/AHD/2012 IS PARTLY ACCEPTED. 21. WE NOW ADVERT TO REVENUES CROSS APPEAL IT(SS)A NO.21/AHD/2012 INVOLVING THE REMAINING TWO GROUNDS APART FROM THOS E ALREADY DEALT WITH IN ASSESSEES APPEAL HEREINABOVE. ITS FIRST SUBSTANTI VE GROUND SEEKS TO REVIVE UNEXPLAINED CASH AMOUNT ADDITION OF RS.1.5LACS AS M ADE IN THE COURSE OF ABOVE ASSESSMENT AND DELETED IN THE LOWER APPELLATE PROCEEDINGS. THERE DOES NOT APPEAR TO BE ANY DISPUTE THAT THE SEARCH AUTHOR ITIES HAD FOUND TOTAL CASH AMOUNT OF RS.33,50,500/- AT ASSESSEES RESIDENCE. THEY WOULD SEIZE A SUM OF RS.33LACS THEREFROM. THE ASSESSEE TRIED TO EXPLAIN TO HAVE WITHDRAWN RS.95000/- ON 07.07.2008 I.E. ALMOST THREE MONTHS B EFORE THE ABOVE SEARCH. HE FURTHER ATTRIBUTED SOME AMOUNT TO IS AGRICULTURA L INCOME WITHOUT STATING ANY PARTICULARS THEREOF. THE ASSESSING OFFICER REJ ECTED THE SAID EXPLANATION TO MAKE THE IMPUGNED ADDITION OF RS.1.5LACS. 22. WE COME TO THE LOWER APPELLATE PROCEEDINGS NOW. IT HAS ALREADY COME ON RECORD THAT THE CIT(A) PREPARED A FUND FLOW CHAR T AS REPRODUCED IN PRECEDING PARAS TO CONCLUDE THAT THE ABOVE SUM FORM S PART OF THE TOTAL SALE CONSIDERATION AMOUNTING TO RS.2.10CRORES (SUPRA). WE HAVE ALREADY OBSERVED HEREINABOVE THAT THE ASSESSING AUTHORITY ITSELF ASS ESSED THE VERY FIGURE FOR THE PURPOSE OF MAKING CAPITAL GAINS ADDITION. LD. DEPA RTMENTAL REPRESENTATIVE FAILS TO REBUT THE ABOVE CASH FLOW CHART. WE THUS FIND NO REASON TO INTERFERE IN THE CIT(A)S ORDER DELETING THE IMPUGNED ADDITIO N. THIS REVENUES GROUND FAILS. 23. THIS LEAVES US WITH REVENUES ONLY REMAINING GR OUND YET TO BE ADJUDICATED AS PERTAINING TO ADDITION OF RS.57,28,3 50/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CASH PAYMENT FOR CA NCELLATION OF SALE DEED IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 19 - WITH SHRI HEMENDRA SHAH (VENDEE). WE COME TO PAGE 41 OF THE CIT(A)S ORDER DISCUSSING THE ISSUE AS UNDER: 11.5. AS REGARDS THE ADDITION OF RS.57,28,350 ON ACCOUNT OF UNEXPLAINED PAYMENT FOR CANCELLATION OF SALE DEED WITH SHRI HEM ENDRA L SHAH, THE AO IN PARA NUMBER 8 OF THE ASSESSMENT ORDER HELD THAT AS PER P AGE NUMBER 22 AND 23 OF THE SALE DEED, THE APPELLANT GAVE AN AMOUNT OF RS.57,28 ,350 IN CASH IN INSTALMENTS TO SHRI HEMENDRA L SHAH FOR CANCELLATION OF THE DEED. BEFORE THE AO, THE CONTENTION OF THE APPELLANT WAS THAT HE RECEIVED ONLY RS. 7LAC S AT THE TIME OF BANAKHAT OF THE LAND IN THE MONTH OF JUNE/JULY 2007 FOR WHICH POWER OF ATTORNEY WAS GIVEN TO ONE SHRI ABBASBHAI MALIK. THE BROKER SHRI ABBASBHAI MAL IK KEPT THE APPELLANT IN DARK AND SOLD THE LAND TO SHRI HEMENDRA L SHAH BY SIGNIN G THE SALE DEED RN THE CAPACITY OF THE POWER OF ATTORNEY HOLDER OF THE APP ELLANT AND COLLECTED CASH OF RS. 50 LAKHS FROM HIM BUT DID NOT GIVE THE AMOUNT TO TH E APPELLANT. SUBSEQUENTLY, THE APPELLANT OBJECTED AGAINST THE TITLE CLEARANCE PUBL IC NOTICE AND FINALLY THE DOCUMENT WAS CANCELLED BY SHRI HEMENDRA L SHAH AND THE SAME LAND WAS SOLD TO SHRI MONIBHAI V PATEL AND OTHERS FOR RS. 2.10 CRORE S. THIS FACT WAS ALSO BROUGHT TO THE NOTICE OF THE SEARCH PARTY AT THE TIME OF RE CORDING THE STATEMENT OF THE APPELLANT AND THEIR FAMILY MEMBERS DURING THE COURS E OF SEARCH ON 15/10/2008 ITSELF. AT THE TIME OF CANCELLATION OF THE SALE DEE D, THE APPELLANT DID NOT PAY ANY AMOUNT TO SHRI HEMENDRA L SHAH BUT FORFEITED THE AM OUNT OF RS. 7LACS RECEIVED FROM HIM BY THE APPELLANT 'AT THE TIME OF THE BANAK HAT OF THE LAND. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTION OF THE APPELLANT A ND HELD THAT NOBODY WILL EXECUTE SALE DEED WITHOUT RECEIVING ANY CONSIDERATI ON. ACCORDING TO THE AO, THE APPELLANT MUST HAVE RECEIVED THE SALE CONSIDERATION IN CASH ON EXECUTION OF SALE DEED ON 27/9/2007 AND THE SAME MUST HAVE BEEN UTILI SED BY THE APPELLANT. THEREFORE THE CASH PAYMENT OF RS.57,28,350 MADE BY THE APPELLANT FOR EXECUTING THE CANCELLATION DEED ON 21/6/2008 WAS TREATED BY H IM AS UNEXPLAINED INVESTMENT. THE SUBMISSION OF THE APPELLANT BEFORE THE AO WAS T HAT THE APPELLANT HAD NOT PAID ANY AMOUNT TO SHRI HEMENDRA L SHAH FOR CANCELLING T HE DEED ON 21/6/2008. THE APPELLANT RECEIVED ONLY RS. 7LACS FROM SHRI HEMENDR A L SHAH AT THE TIME OF BANAKHAT IN THE MONTH OF J.UNE/JULY 2007 AND THE BA LANCE AMOUNT OF RS. 50. LACS, IF ANY, WAS RECEIVED BY HIS BROKER SHRI ABBASBHAI M ALIK. IN FACT, AT THE TIME OF THE CANCELLATION OF THE DEED ON 21/6/2008 THE APPELLANT DID NOT EVEN RETURN THE AMOUNT OF RS. 7LACS TO SHRI HEMENDRA L SHAH AND FORFEITED THE AMOUNT OF RS. 7LACS WHICH HAS BEEN SHOWN BY THE APPELLANT IN THE RETURN' OF I NCOME. IN MY OPINION; THE VIEW OF THE AO CANNOT BE SUSTAINED ON THIS POINT PARTICU LARLY WHEN, THE AO HAS ACCEPTED THAT THE SALE DEED OF THE LAND WITH SHRI H EMENDRA L SHAH WAS EXECUTED FOR R S .57.28 LACS AND AT THE TIME OF CANCELLATION OF THE SALE DEED, THE AMOUNT OF RS. 57.28 LACS WAS RETURNED TO HIM. IF IT IS SO, TH EN THE AMOUNT OF RS.57.28 LACS RECEIVED AT THE TIME OF EXECUTING THE SALE DEED HAD BEEN RETURNED BY THE APPELLANT TO SHRI HEMENDRA L SHAH AT THE TIME OF CANCELLATION OF THE DEED. IN OTHER WORDS, THE SOURCE OF THE AMOUNT OF RS.57.28 LACS GETS EXPL AINED. THE ADDITION OF RS.57,28,350 IS DIRECTED TO BE DELETED. 24. IT HAS THUS COME ON RECORD THAT THE ASSES SEE PAID BACK THE IMPUGNED ADVANCE SUM OF RS.57.28 LACS BACK TO THE A BOVE VENDEE. IT IS IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 20 - THEREFORE CLEAR THAT THE ABOVE ADVANCE SUM FORMED S OURCE OF THE RETURNED AMOUNT IN QUESTION. THE REVENUE ALSO FAILS TO REBU T THIS FACTUAL POSITION. IT SUBSTANTIVE GROUND IN QUESTION IS THUS DECLINED. REVENUES APPEAL IT(SS)A NO.21/AHD/2012 IS PARTLY ACCEPTED FOR STATISTICAL P URPOSES. 25. WE COME TO ASSESSMENT YEAR 2008-09 NOW INVOLVIN G THE REMAINING FOUR APPEALS. IT(SS)A NO.8/AHD/2012 IS ASSESSEES APPEAL. HIS SOLE SUBSTANTIVE GROUND SEEKS TO ASSAIL CORRECTNESS OF U NEXPLAINED INVESTMENT IN ASSETS ADDITION OF RS.5.33LACS. BOTH THE LOWER AUT HORITIES HOLD THAT THE SAME IS NOT FROM THE ABOVESTATED SALE CONSIDERATION AMOU NT OF RS.2.1 CRORES. THE CIT(A) HOLDS IN PARA 9.7 OF THE ORDER THAT THE DECE ASED ASSESSEE WAS SOLE OWNER OF THE LAND AND HE UTILIZED SALE PROCEEDS THE REOF IN ACQUIRING VARIOUS ASSETS SUCH AS LIC POLICY, MONTHLY INCOME SCHEME A ND CONSTRUCTION OF HOUSE AND TEMPLE IN THE NAMES OF OTHER FAMILY MEMBE RS. HE THEREAFTER CONCLUDES THAT THE ABOVE CASH FLOW CHART HAD ALREAD Y MADE IT CLEAR THAT THE REMAINING FIGURE IN QUESTION OF RS.5.33 LACS IN THE IMPUGNED ASSESSMENT YEAR HAS REMAINED UNEXPLAINED. HE HAS ACCORDINGLY CONFI RMED THE IMPUGNED ADDITION. 26. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEES ONLY CONTENTION BEFORE US IS THAT THE AUTHORITIES BELOW HAVE NOT GIVEN HIM ANY CREDIT OF AGRICULTURAL INCOME DERIVED FROM THE LAND SOLD AS WELL THE OTHE R SOURCE IS OF DAIRY FARMING AND PLYING OF PASSENGER VEHICLES. LD. DEP ARTMENTAL REPRESENTATIVE VEHEMENTLY OPPOSES THE SAME BY STATING THAT THE ASS ESSEE OUGHT TO HAVE FILED THE NECESSARY EVIDENCE ON RECORD BEFORE CLAIMING SU CH A RELIEF. HE HOWEVER DOES NOT DISPUTE THAT THE ASSESSEE VERY MUCH OWNED THE ABOVE AGRICULTURAL LANDS AS SOLD IN PREVIOUS YEAR RELEVANT TO THE SUCC EEDING ASSESSMENT YEAR. WE THEREFORE ADOPT ESTIMATION METHOD HEREIN AS WELL TO CONCLUDE THAT LARGER INTEREST OF JUSTICE WOULD BE MADE IN CASE ASSESSEE S ANNUAL INCOME FROM IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 21 - ABOVE AGRICULTURAL LANDS ETC. IS TAKEN AS RS.3.5 LA CS IN THE IMPUGNED ASSESSMENT YEAR AS WELL. NEEDLESS TO SAY, BOTH THE LOWER AUTHORITIES HAVE NOT TAKEN INTO CONSIDERATION THE ASSESSEES AGRICULTURA L LAND AS SOURCE OF INCOME. THE IMPUGNED ADDITION IS ACCORDINGLY RESTRICTED FRO M RS.5.33LACS TO RS.1.83LACS ONLY. THIS ASSESSEES GROUND AS WELL A S MAIN APPEAL IT(SS)A NO.8/AHD/2012 IS PARTLY ACCEPTED. 27. NEXT THREE ARE REVENUES APPEALS IT(SS)A NOS. 1 9, 20 & 22/AHD/2012 FILED IN RESPECTIVE CASES OF ALL THE THREES ASSESSE ES NAMELY SHRI RANJIT V MAKWANA, SHRI GANDABHAI MAKWANA AND SHRI SENDHABHAI MAKWANA. THE REVENUES SOLE SUBSTANTIVE GROUND IDENTICAL (THE ON LY DIFFERENCE BEING IN THE AMOUNTS INVOLVED IN CORRESPONDING ADDITION FIGURES) IN ALL THREE CASES SEEKS TO REVIVE UNEXPLAINED INVESTMENT ADDITIONS OF RS.35 ,37,220/-, RS.31.98LACS & RS.35,15,280/- AS MADE IN LIC POLICIES, CONSTRUCTIO N OF HOUSE/TEMPLE AND MONTHLY INCOME SCHEMES. THE ASSESSING OFFICER DECL INED ASSESSEES EXPLANATION ON IDENTICAL LINES AS TO HAVE ACQUIRED ALL THESE ASSETS FROM THE ABOVE SALE CONSIDERATION OF RS.2.1CRORES (SUPRA). THE ASSESSING OFFICER REJECTED THE SAME AFTER HOLDING THAT THE VENDEES IN QUESTION HAD NOT SUPPORTED THE ABOVE CONSIDERATION AMOUNT. IT HAS COME ON REC ORD THAT WE HAVE ALREADY OBSERVED THAT THE ASSESSING OFFICERS ABOVE STAND G OES CONTRARY TO THE CAPITAL GAIN ADDITIONS WHEREIN THE VERY FIGURE HAS BEEN TAK EN AS THE GROSS SALE CONSIDERATION. WE NOW NOTICE ON MERITS THAT THE CI T(A)S FUND FLOW CHART PREPARED AND EXTRACTED IN THE PRECEDING PARAGRAPH DULY CONSIDERS NOT ONLY THE IMPUGNED INVESTMENT BUT ALSO SOURCE THEREOF IN ORDER TO UPHOLD ASSESSEES CONTENTIONS TO HAVE ACQUIRED ALL THESE A SSETS OUT OF THE LAND SALE CONSIDERATION. LD. DEPARTMENTAL REPRESENTATIVE DOE S NOT PLACE ON RECORD ANY MATERIAL TO CONTRADICT CORRECTNESS THEREOF IN THE C OURSE OF ARGUMENTS. WE THUS FIND NO REASON TO INTERFERE WITH THE CIT(A)S COMMON ORDER UNDER IT(SS)A NOS.8, 9, 19, 20, 21 & 22/AHD/2012 ( SHRI GANDABHAI A MAKWANA & 2 ORS.) A.Y. 2008-09 & 2009-10 - 22 - CHALLENGE IN ALL THESE THREE APPEALS. IT(SS)A NOS. 19, 20 & 22/AHD/2012 ARE DECLINED. 28. WE REFER TO OUR ABOVE DISCUSSION TO PARTLY ALLO W ASSESSEES APPEALS IT(SS)A NOS. 8 & 9/AHD/2012. REVENUES APPEAL IT(S S)A NO.21/AHD/2012 IS PARTLY ACCEPTED FOR STATISTICAL PURPOSES. ITS T HREE OTHER APPEALS IT(SS)A NOS. 19, 20 & 22/AHD/2012 ARE DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 16 TH DAY OF DECEMBER, 2016.] SD/- SD/- (PRADIP KUMAR KEDIA) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 16/12/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )* + ,--. . /0 / DR, ITAT, AHMEDABAD 1 + 23 4 5 / GUARD FILE. BY ORDER / . // . /0
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