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2019 (8) TMI 505 - AT - Income TaxIncome arising on sale of land at Village Dhamane - agricultural land - HELD THAT - The land at Village Dhamane is clearly established to be an agricultural land. It had been specifically analyzed in detail by the Tribunal in SHRI KRISHNA KUMAR K. GOYAL VERSUS ACIT 2014 (11) TMI 258 - ITAT PUNE and the Revenue has not brought in any evidence or materials on record to negate the assertions made by the assessee neither they have controverted any facts on record. Evidently, the assessee has shown in the Balance Sheet the land in question as a Personal Asset as distinct from Business Assets . The agricultural lands held by the assessee are for a substantial period of time and assessee has been showing such assets as a part of his Personal Assets , being investments and not as Business Assets in the Balance Sheet filed along with the respective returns of income. We hold that the Sub-ordinate Authorities had erred in treating the income arising on the sale of such land at Village Dhamane as sale of stock in trade and in our view, income arising on sale of land at Village Dhamane was on account of sale of investment. Since, there is no dispute that the land in question carried the features prescribed in section 2(14)(iii) and moreover, being analyzed by the Tribunal in the earlier orders, it qualifies to be an agricultural land excludable from the expression capital asset . We therefore, set aside the order of the Ld. CIT(A) and direct the AO to delete the addition on this count from the hands of the assessee. Thus, this ground of appeal raised by the assessee is allowed. Deemed dividend u/s. 2(22)(e) - treating business advance received from Kohinoor Shelter Private Limited - assessee filed additional evidences vide letter containing MOU between the assessee and M/s. Kohinoor Shelters Pvt. Ltd. which was subsequently cancelled along with confirmation of accounts - HELD THAT - The view of the Ld. CIT(Appeals) is that since the affidavit of Mr. L.R Agarwal dated 14.03.2012 was filed at delayed time and therefore, the AO is correct that the story of MOU and its cancellation is nothing but an afterthought without any specific findings or reasons given on his part, is therefore, not correct. That within the ambit of Rule 46A, the Ld. CIT(A) should have admitted the additional evidences and should have followed the procedure laid down therein. The grievance of the assessee in the additional ground along with this ground in the appeal Memo is with regard to non admission of additional evidences by the CIT(A). We further observe that these additional evidences were not accepted by the AO since the assessment order was already passed. In the interest of justice, we set aside the order of the CIT(A) on this issue and restore the matter to the file of Assessing officer and direct the assessee to produce all the additional evidences before the AO and present their case on merits. - Ground of the assessee are allowed for statistical purposes.
Issues Involved:
1. Whether the surplus earned from the sale of agricultural land at Village Dhamane could be charged as "business income." 2. Whether the business advance received by the assessee from Kohinoor Shelter Private Limited was deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961. 3. Whether the Ld. CIT(Appeals) erred in not admitting additional evidence in contravention to Rule 46A of the Income Tax Rules, 1962. Issue-wise Detailed Analysis: 1. Surplus Earned from Sale of Agricultural Land: The assessee contended that the land at Village Dhamane was agricultural land, located beyond 8 kilometers from local limits, with a population of less than 10,000 as per the last census, and thus did not fall within the definition of "Capital Asset" under Section 2(14)(iii) of the Income Tax Act. The assessee emphasized that the 7/12 extracts, which are land revenue records, confirmed the land's agricultural nature. The Tribunal had previously determined similar lands in the same village as agricultural in nature in the cases of the assessee's father and brother, ruling that the surplus could not be taxed as "business income." The Revenue argued that the assessee, being a land developer, had the primary intention of business transactions when purchasing the land, given the short holding period and significant surplus earned. The Tribunal analyzed the nature of the land, noting that the land was shown as a "Personal Asset" in the Balance Sheet, not as a "Business Asset." The Tribunal found that the land was indeed agricultural, supported by certificates from local authorities and the lack of any development activity by the assessee. The Tribunal concluded that the land was an investment, not stock-in-trade, and thus the surplus should not be treated as business income. The Tribunal referred to the judgment of the Hon'ble Bombay High Court in CIT Vs. Minguel Chandra Pais & Anr., which held that land classified as agricultural in revenue records should be treated as such, regardless of the agricultural income generated. 2. Business Advance as Deemed Dividend: The assessee received a business advance from Kohinoor Shelter Private Limited, which the Assessing Officer treated as deemed dividend under Section 2(22)(e) of the Act. The assessee provided detailed submissions and additional evidence, including a Memorandum of Understanding (MOU) and its subsequent cancellation. The Ld. CIT(Appeals) upheld the addition, focusing on the timing of the additional evidence submission rather than its admissibility or genuineness. The Tribunal noted that Rule 46A does not specify a time limit for producing additional evidence. The Tribunal criticized the Ld. CIT(Appeals) for not admitting the additional evidence and for not following the procedure laid down in Rule 46A. The Tribunal set aside the order of the Ld. CIT(Appeals) and restored the matter to the Assessing Officer, directing the assessee to produce all additional evidence and for the Assessing Officer to adjudicate the issue on merits, ensuring compliance with the principles of natural justice. 3. Non-admission of Additional Evidence: The Tribunal observed that the additional evidence was not accepted by the Assessing Officer because the assessment order had already been passed. The Tribunal held that the Ld. CIT(Appeals) should have admitted the additional evidence under Rule 46A and followed the prescribed procedure. The Tribunal set aside the order of the Ld. CIT(Appeals) on this issue and restored the matter to the Assessing Officer for a fresh adjudication, ensuring a reasonable opportunity for the assessee to present their case. Conclusion: The appeal of the assessee was partly allowed for statistical purposes. The Tribunal directed the deletion of the addition related to the surplus from the sale of agricultural land and remanded the issue of deemed dividend and non-admission of additional evidence to the Assessing Officer for fresh adjudication. The Tribunal emphasized the need for compliance with the principles of natural justice and proper procedural adherence. Order Pronounced: The order was pronounced on the 7th day of August, 2019.
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