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TMI Blog2013 (12) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... ission and brokerage in the real estate sector. The assessee during the relevant assessment year has also started a new venture of plotting land and selling them on instalment basis to prospective customers. For the assessment year under dispute, the assessee filed its return of income declaring a total income of Rs.7,10,450. The return was initially processed u/s 143(1) of the Act. Subsequently, on 22-1-2009 the AO issued a notice u/s 142(1) calling for certain information. In response to the notice, the assessee appeared before the AO on 18-2- 2009. Thereafter, a notice u/s 143(2) was issued on 9-9- 2009 by the AO requiring the assessee to produce books of accounts and other documents in support of his return of income filed for the impugned assessment year. In response to the said notice, the assessee appeared and the assessment u/s 143(3) was completed on 30-12-2009 determining the total income at Rs.2,08,86,720 after making various additions and disallowances. The assessee being aggrieved of the assessment order, filed an appeal before the CIT (A) raising various grounds one of them being to the effect that the assessment order passed u/s 143(2) is null and void since the noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport of his arguments of not following the judgment of Punjab & Haryana High Court in the case of Om Sons International vs. CIT (2011) 60 DTR (P&H) 393 and Co-ordinate Bench of the Tribunal in the case of M/s Navayuga Spatial Technologies Pvt. Ltd. (supra). The learned AR submitted that the notice u/s 143(2) is the very foundation for assuming jurisdiction by the AO for initiating assessment proceedings. The learned AR relying upon a judgment of Hon'ble Supreme Court in the case of Hotel Blue Moon reported in 321 ITR 362 submitted that issue of notice u/s 143(2) of the Act goes to the very root of the jurisdiction and therefore any violation of the provisions of section 143(2) of the Act cannot be treated as mere procedural irregularity and therefore not curable. The learned AR relying upon the decision of Allahabad High Court in the case of CIT vs. Mukesh Kumar Agrawal 345 ITR 29 submitted that in a case where notice u/s 143(2) of the Act was issued belatedly, non consideration of section 292BB by the law laid down by the Hon'ble Supreme Court in Hotel Blue Moon case (supra) will still be applicable even though the Hon'ble Supreme Court did not consider the effect of sec. 292BB. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not consider the provisions of section 292BB of the Act. The learned DR submitted that the belated issuance of notice u/s 143(2) is a procedural defect and is curable. 7. We have heard rival submissions perused the material on record and also considered the elaborate written submissions filed by the respective parties. We also examined the decisions cited at the Bar. On proper appreciation, the following dates are reproduced below:- 30-11-2007 - return of income filed by the assessee for assessment year 2007-08. 9-9-2009 - Notice u/s 143(2) issued by the CIT 1-12-2008 - One year expired from the date of filing of the return. 8. It is the contention of the learned AR that for valid initiation of proceedings notice u/s 143(2) should have been issued by 1-12-2008. The revenue does not dispute the fact that the notice u/s 143(2) was issued on 9-9-2009 i.e. beyond one year from the date of filing of the return. However, it is the contention of the learned DR that since the assessee has participated in the assessment proceedings and fully cooperated for completion of the assessment without raising any objection with regard to belated issuance of notice u/s 143(2), it is precluded u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings, irrespective of the assessment years, to which they relate, as held by the Punjab and Haryana High Court in the case of Om Sons International vs. CIT (2011) 60 DTR ( P& H) 393, wherein it was held- "... The provision has been made effective from 1st April, 2008 and therefore, shall apply to all pending proceedings. The CBDT issued Circular No.1 of 2009 dt. 27th March, 2009 (2009) 222 CTR (St) 69: (2009) 310 ITR (ST) 42) giving explanatory notes on the provisions relating to direct taxes contained in Finance Act, 2008 clause 42.7 (at p. 86 of the report) is relevant which relates to applicability of this provision and reads thus -: "42.7 Applicability: This amendment has been made applicable w.e.f. 1st April, 2008. This means that the provision of new s. 2923BB shall apply to all proceedings which are pending on 1st April, 2008, ............" We are also supported in this behalf by the decision of the Special Bench of the Tribunal in Kuber Tobacco Products (P ) Ltd. Vs. DCIT (117 ITD 273), wherein it was held that by insertion of s. 292BB, right of the assessee to challenge the validity of assessment or reassessment proceedings during the course of appellate proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee during the relevant assessment year claimed to have sold agricultural land to the extent of Ac.67.27 guntas situated at various places under different sale deeds for a consideration of Rs.1,68,43,871/- after deducting the cost of land amounting to Rs.25,67,662/-, profit of Rs.1,42,03,213/- was derived from sale of land for the financial year 2005-06 and 2006-07. Apart from the aforesaid sale of the land, the assessee also received an amount of Rs.25,10,787/- towards sale of other lands. In course of assessment proceedings, the AO asked the assessee to furnish details in support of his claim that the land sold was agricultural lands. As observed by the AO since the assessee did not produce any document with regard to the land in question, the AO added the amount of Rs.25,10,787/-. The assessee being aggrieved of the addition made by the AO, filed an appeal before the CIT (A). The CIT (A) also sustained such addition by holding that in absence of any details, the assessee's claim cannot be accepted and the income has to be assessed as income from 'other sources' against which no expenses are allowable. In his written submissions, the learned AR has contended that all the detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are sustained by the CIT (A). The expenses claimed are under the following heads:- i) development expenses Rs. 17,16,000 ii) salaries Rs.2,70,800 iii) Survey expenses Rs. 74,000 iv) Misc. Expenses Rs.75,000 In course of assessment proceedings, the AO found that the assessee had claimed land development expenses of Rs.34,31,907/-. The AO found from the books of the assessee that the advances were received from customers against sale of plots from the month of April, 2006 much before the registration of the land. Observing that the assessee has not claimed any lay out expenses for development of such land to sell them as plots, the AO asked the assessee to produce bills and vouchers in support of its claim of land development expenses. Since the assessee did not produce any bills and vouchers an amount of Rs.17,60,000/- was disallowed out of total expenditure claimed by the assessee to tune of Rs.34,31,907/-. Similarly, the AO disallowed a sum of Rs.2,70,800/- from total expenses of Rs.6,77,000 towards payment of salary in the absence of production of relevant information by the assessee. Out of survey expenses of Rs.1,84,790/- the AO disallowed a sum of Rs.74,000/- sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is allowed in part. 17. So far as the ground No.5 regarding disallowance for Rs.75,000 out of misc. Expenses is concerned, it is seen that the said disallowance has been included as a part of Rs.21,35,800/- considered by the CIT (A) in para 6.3 and 6.3.1 of his order. Therefore, no separate disallowance again could be made of the aforesaid amount. Hence, we reverse the findings of the CIT (A) on this issue. The ground raised by the assessee is allowed. 18. Ground No.6 relates to addition of Rs.5,20,000/- being the difference in the cash book. Briefly the facts are the AO while examining the computerised cash book in the course of assessment proceedings found a deficit cash balance on 25-6-2006 where the closing balance was shown in the following manner:- Debit balance Rs.51,10,707 Credit balance Rs.55,46,411 It has been alleged by the AO that to cover up the deficit, the assessee made some entries on 25-6-2006 amounting to Rs.5,20,000/-. When the AO asked the assessee to explain the details for the aforesaid deposits, the assessee could not explain nor could produce original receipts for the same. The AO therefore came to a conclusion that the cash brought into the cash bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a profit of Rs.1,07,59,588/-. The assessee claimed the gain out of sale of land as exempt on the ground that the land sold being agricultural land is not capital asset within the meaning of section 2(14) of the Act. The AO in the course of assessment proceedings found that the lands in question were sold and registered in the name of various real estate companies and firms that apart the registrations were effected only after Sept. 2006. However, the assessee though was holding the lands till Sept. 2006 no agricultural income for the assessment year 2007-08 has been shown. The AO further observed that the assessee failed to produce any bills or vouchers either towards sale of agriculture produce or expenses incurred towards cultivation and earning of agricultural income. It has been further noted by the AO that the major lands were sold to real estate companies and firms and are meant for plotting and developing for sale as plots. The AO further came to a finding that the assessee himself might have developed the said land well before they were sold as plots which facilitated coming forward of real estate company and the firm for purchasing such land by offering lucrative price wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R further submitted that the sale of land to the real estate companies is also a crucial factor to determine the intention of the assessee and also the nature and character of the land. 27. The learned AR for the assessee joining issue, submitted before us that the assessee was holding the land for the period of more than 10 years and was also cultivating the land ever since they were acquired. The assessee is also offering agricultural income from year to year. The learned AR contended that the AO has made the addition purely on conjectures and surmises by assuming that the assessee has sold the land to real estate companies after developing and plotting them. The learned AR submitted that the nature and charter of the land have been recorded as agricultural land in the revenue records and pattadar pass books. It is the further contention of the learned AR that the lands sold being agricultural land, it cannot be treated as capital asset u/s 2(14) of the Act and gains from the sale of land cannot be brought to tax under any head of income including business income. The ld. AR submitted that the assessee has satisfied all the tests laid down by the Hon'ble Gujarat High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural income in its return. However, the CIT (A) has failed to examine whether the agricultural income shown by the assessee will be the expected income from cultivation of 67 acres of land or not. Neither the CIT (A) nor the AO has examined this aspect in the light of guidelines laid down by the Hon'ble Supreme Court in the case of Sarifabibi Mohamed Ibrahim(supra). It is a fact on record that apart from taking shelter being the fact that some amount of agricultural income was disclosed in the return of income filed for the earlier assessment year, the assessee has failed to produce any other evidence to substantiate the claim that agricultural operations were carried on by him in all the land sold by him. Nothing has been brought on record to show that the entire 67 acres of land was under cultivation before it was sold by the assessee. It has not been enquired into as to whether the income declared from agricultural operations carried on in the land sold bore any rationale proportion to the extent of the land holding. Another material fact which the AO has dealt with but has completely been overlooked by the CIT (A) is that for the assessment year under dispute, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Any discrepancy by itself cannot be a ground for addition without proving the fact that such discrepancy has resulted in an undisclosed income. As has been observed by the CIT (A) the AO has not alleged that there are any unexplained credits on this account. In these circumstances, we agree with the findings of the CIT (A) that the addition of Rs.2,50,000/- is un-called for. Hence the ground raised by the Revenue on this issue is rejected/dismissed. 31. Ground No.5 relates to the disallowance of Rs.10 lakhs made by the AO which was deleted by the CIT (A). Brief facts of this issue are while examining the ledger account relating to M/s Balaji Real Estates, the AO found that the customers' addresses were not noted in the ledger. He therefore asked to furnish full details regarding the transactions made with the said firm. As alleged by the AO in the absence of any substantive reply from the assessee, he disallowed an amount of Rs.10 lakhs from the total transactions of Rs.1,27,46,875/- on the ground that the assessee might have made unregistered transactions and earned profit which was not disclosed to the Income-tax Department. The CIT (A) deleted such addition on the ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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