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2018 (6) TMI 1507 - AT - Income TaxAddition of Labour Charges - addition on account of Cutting charges - Held that - Addition is made on presumption basis and without enquiry. Even then, the alternative plea of the assessee was considered and 50% of the income was reduced. When a factual finding is given by the CIT(A) that the addition is made on presumption and that no evidence was found in the impounded material that cutting charges have been levied on the quantity of 2400 MT and when the assessee has furnished confirmations from three parties to that effect, the question of making of addition on this issue does not arise. Hence the entire addition should have been deleted. Hence the addition is deleted and the ground is allowed. Computation of profit of sale of land - Held that - Merely because the assessee offered income of the purchase and sale of agricultural land, the income cannot be taxed under the Income Tax Act, 1961. Allow the additional grounds filed by the assessee.
Issues:
1. Addition of Labour Charges on Cutting Charges 2. Disallowance of Development Cost in Computation of Short Term Capital Gains 3. Additional Grounds Related to Land Being Agricultural and No Capital Gains Issue 1: Addition of Labour Charges on Cutting Charges The appellant appealed against the addition of Labour Charges to the tune of ?3,60,000 out of the estimated addition on account of Cutting charges made by the Assessing Officer. The Appellate Tribunal held that the addition was made on a presumption basis without proper enquiry. The Tribunal noted that the appellant provided confirmations from parties stating that no cutting was done on certain sales, yet the AO did not make any enquiry and assumed payments were received. The Tribunal found that the entire addition should have been deleted as there was no evidence to support the addition. Therefore, the addition of ?3,60,000 was deleted, and the ground was allowed. Issue 2: Disallowance of Development Cost in Computation of Short Term Capital Gains The second issue involved the disallowance of development cost of ?10,81,200 in the computation of short term capital gains on sales of land. The Assessing Officer found no change in the nature of the land from agricultural to non-agricultural, and the First Appellate Authority upheld this finding. The Tribunal referred to legal precedents where capital gains from the sale of agricultural land were considered agricultural income and not taxable under the Income Tax Act. Additionally, the Tribunal cited cases emphasizing that there cannot be estoppel against the statute, and an item not otherwise taxable cannot become taxable due to misunderstanding by the assessee. Therefore, the Tribunal held that the profit on the sale of agricultural land cannot be treated as income under the Income Tax Act. The additional grounds filed by the assessee were allowed, and the appeal was allowed in this regard. Issue 3: Additional Grounds Related to Land Being Agricultural and No Capital Gains The additional grounds filed by the assessee related to the nature of the land being agricultural and no capital gains arising from the sale of agricultural lands chargeable to tax under the Income Tax Act. The Tribunal admitted these additional grounds based on legal principles and previous judgments. The Tribunal considered the nature of the land at the time of purchase and sale, concluding that no change occurred from agricultural land to non-agricultural land. Citing legal precedents, the Tribunal held that the profit on the sale of agricultural land cannot be taxed under the Income Tax Act. The Tribunal emphasized that there is no estoppel against the statute and that income not otherwise taxable cannot be taxed due to the assessee's misunderstanding. Therefore, the additional grounds were allowed, and the appeal of the assessee was allowed. In conclusion, the Appellate Tribunal ITAT KOLKATA ruled in favor of the assessee on all issues, deleting the addition of Labour Charges on Cutting Charges and disallowance of Development Cost in the computation of Short Term Capital Gains on sales of land based on legal principles and precedents.
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