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TMI Blog2014 (7) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue. Treatment of tax of the profit earned on sale of land - Business income or capital gains - Held that:- Assessee has claimed deduction u/s. 80IB of the Act for the development of housing projects meaning thereby that the Assessee was engaged in the business of development of housing projects in those years. - A.O has rightly treated the profit from sale of land bearing plot no 91 as "business income". - Decided against the assessee. Profit of sale of land not disclosed in the books of accounts - Held that:- The submission of the Assessee that the non recording of land in the individual balance sheets was on account of mistake in accounting was also not accepted by CIT(A). Before us the Assessee could not demonstrate as to how the mistake continued for so many years more so, when the accounts of the firm and the Assessee were audited year after year. - taxable as business income - Decided against the assessee. Addition u/s. 41(1) of the Act - Advance received against land sale - A.O as of the view that when the deed of conveyance proved that the transaction was over and each party had taken over the possession of property/consideration, the liability of ₹ 1,27, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. On the facts and in the circumstances of the case, the Id. CIT(Appeals) has erred in directing the Assessing Officer to treat the agricultural income at ₹ 12,12,220/- as claimed by the assessee as against restricting the same at ₹ 4,62,220/- without appreciating the fact that the assessee had failed to substantiate his claim with supporting evidence to prove that he had really carried out any agricultural activities and that the bills and vouchers produced in support of his claim were fictitious as elaborately discussed in the assessment order. 2. On the facts and in the circumstances of the case, the Id.CIT (Appeals) has erred in restricting the addition made on account of disallowance of claim of long term capital gain and by treating the sale consideration of land as business income of ₹ 1,42,97,628/- to Rs,32,55,053/-. The Id.CIT (Appeals) erred in not appreciating the fact that the modus operandi of the assessee's business is that the assessee purchases agricultural land and converts it in non-agricultural by legal formalities and sell the land with development right - adventure in the nature of the trade. Thus, the assessee is not an investor in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om sale of a capital asset may please be directed to be assessed as income from sale of capital asset as capital gains instead of business income. 5. The Id. CIT(A) further erred in law and in facts and in contradiction to her own finding of directing the taxation of capital gains of ₹ 32,55,053/- (Rs. 10,95,741/- + ₹ 21,59,312/-) from the sale of land at Survey Nos. 287 and 485 as income of the appellant despite holding that the land at Revenue Survey Nos. 287 and 485 were purchased and reflected in the accounts of M/s. Satyanarayan Traders, Partnership firm. Even from this count, the taxation of the amount of ₹ 32,55,053/- in the case of the appellant deserves deletion. 1st ground of the Revenue's appeal is with respect to restriction of the addition made to agriculture income: 5. During the course of assessment proceedings, A.O noticed that Assessee had declared agricultural income of ₹ 12,12,220/-. Assessee was asked to furnish the details of the agriculture income. On the basis of the copies of the bills of purchasers submitted by the Assessee, A.O noticed that in the copies of bills of M/s. Parshwa Trading and Harsh Corporation, the addres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from agriculture and therefore the claim of the Assessee was considered to be reasonable. He submitted that the conclusion of the ld CIT(A) was without any basis and not supported by material on record. The ld. D.R. further submitted that Assessee has not placed on record his land holding, the area under cultivation, the nature of crops grown etc to substantiate his claim of earning income from agriculture activities. He thus supported the order of A.O. The Ld. A.R. on the other hand submitted that submission of ld. D.R. that no address were mentioned in the bills of purchasers is factually incorrect as the bills do have their addresses and for which he pointed to copies of bills placed page no. 86 onwards in the paper book. He further submitted that agriculture produce was sold to APMC and the copies of the weight of the produce sold are also placed on pages 76 to 86 of the paper book. He further submitted that in the case of agriculture produce generally the prevalent system is that bills are prepared by the purchasers and not the sellers and in the present case the purchasers was having the system of preparing the bills starting from Sr. no. 1 on each day. He further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d what were the irrigation facilities available to which neither the ld. A.R. or ld. D.R. could furnish any reply. We are therefore of the view that the details like the land holding under agriculture, nature of irrigation facilities on the land, the crops grown on the land in the relevant period, record of crops grown in the Revenue records needs to be verified and therefore the matter is restored to the file of A.O for him to examine the aforesaid facts and thereafter decide the issue as per law. Needless to state that AO shall grant adequate opportunity of hearing to the Assessee. We also direct the assessee to co-operate by promptly furnishing the necessary details called for by the AO to decide the issue. Assessee is also free to produce additional evidence, if any, in support of his contentions. In the result, this ground of Revenue is allowed for statistical purposes. 2nd ground is with respect to restricting the addition made on account of disallowance of long term capital gain:- 9. This ground of Revenue is interconnected with the grounds raised by Assessee and therefore the ground of Revenue and Assessee are considered together. 10. A.O noticed that during the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will indicating its holding was for a period of 20 years. Various Courts have held that it is not the transaction at the time of sale which has to be considered, rather the intention of the appellant at the time of purchase is to be considered. In the instant case the appellant has not purchased the land but has received it under a will. The Assessing Officer has claimed that the appellant has sought and received clearance from the Local Authority for the purpose of development of the said land. Further, the land was sold after plotting the same into 206 plots. I do not find any discrepancy in getting the clearance from the Local Authority converting agricultural land into non agricultural land for the purpose of making a sale. The Assessing Officer's contention that the land was plotted and then sold cannot be fully accepted because the plotting was done only on paper and land as such was sold as a single piece to Janpriya Trust of Delhi. Hence it is not a case of the land being broken into various small sections and then sold. The land was inherited by the appellant and after holding the same for a period of more than 20 years was sold. Taxing of the income under the head ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer's conclusion that the income derived from the sale of this plot of land is income from business is correct and the addition of ₹ 32,55,053/- is confirmed 11. Aggrieved by the order of CIT(A), the Revenue and Assessee are now in appeal before us. 12. Before us, ld. D.R. took us through the findings and observations of the A.O. He further submitted that the Assessee purchases land and converts it into non agriculture land by completing the legal formalities and after completion of the legal formalities the land is sold. He pointed to the findings of A.O specifically the finding that Assessee had acquired permissions from various authorities for conversion of agricultural land to non agricultural land and after developing the land and dividing the same into different plots, the land was sold by Assessee. He further submitted that the nature of activity of purchasing land converting the land to non agriculture land and selling it was in the nature of business activity and not the capital gain. He further submitted that in A.Y. 05-06 06-07 Assessee has claimed deduction under 80IB of the Act meaning thereby that the Assessee is in the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the balance sheet of the Assessee after its acquisition. Though the ld. A.R. has submitted that in the Hakk Patrak ( placed at page 137 of the paper book) which is record of rights, the name of the Assessee has been entered in it. From the copy of the assessment order for A.Y. 05-06 which is placed at page 51 of the paper book, it is seen that the Assessee in that year had got the accounts audited under section 44AB of the Act and had filed the Tax Audit Report along with the Balance Sheet, Profit and Loss account etc. When the Assessee is maintaining the books of accounts and had got the same audited, no valid justification has been offered for not showing the land acquired through inheritance from financial year 97-98 onwards in the Balance Sheet. A.O in his order has also noted that Assessee had got completed various legal formalities like obtaining N.A. order from Collector Vadodara, Development permission from Municipal Corporation, Zoning Certificate from Vadodara Urban Development Authority getting the lay out plans approved, developed the land and divided the land into 206 plots. From the assessment orders for A.Y. 05-06 06-07 which has been placed in the paper book, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismissed. Now we take up Revenue's appeal in ITA No. 2658/AHD/2010 (Revenue's appeal) 2704/AHD/2010 (for 2007-08 Shri Hashmukhbhai R. Prajapti ) The grounds raised in Revenue's appeal reads as under:- 1. On the facts and in the circumstances of the case, the Id.CIT(Appeals) has erred in directing the Assessing Officer to treat the agricultural income at ₹ 7,24,132/- as claimed by the assessee as against restricting the same at ₹ 3,74,132/- without appreciating the fact that the assessee had failed to substantiate his claim with supporting evidence to prove that he had really carried out any agricultural activity and that the bills vouchers produced in support of his claim were fictitious as elaborately discussed in the assessment order. 2. On the facts and in the circumstances of the case, the Id.CIT (Appeals) has erred in restricting the addition made on account of disallowance of claim of long term capital gain and by treating the sale consideration of land as business income of ₹ 1,21,38,316/- to ₹ 10,95,741/-. The Id.CIT (Appeals) erred in not appreciating the fact that the modus operandi of the assessee's business is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... despite holding that the land at Revenue Survey No. 287 was purchased and reflected in the accounts of M/s. Satyanarayan Traders, partnership firm. Even from this count, the taxation of the amount of ₹ 10,95,741/- in the case of the appellant deserves deletion. 18. Before us, both the parties submitted that except ground no. 3 of Revenue's appeal, all the grounds of Revenue's and Assessee's appeal are identical to the grounds raised by Revenue and Assessee in case of Shri Ramesh Prajapati. We therefore for the similar reasons stated hereinabove, while deciding the appeals in the case of Ramesh Prajapati, allow ground no. 1 of Revenue's appeal for statistical purposes and allow ground no. 2 of Revenue's appeal and the grounds raised in Assessee's appeal are dismissed. 3rd ground of Revenue is with respect to addition u/s. 41(1). 19. During the course of assessment proceedings, on verification of the Balance Sheet. A.O noticed that Assessee had shown amount of ₹ 1,48,25,333/- as advance received against land sale . The breakup of the advance received against sale of land is tabulated at page 10 of the order. He also noticed that it includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration and therefore provisions of Section 41(1) of the Act was not applicable. Further CIT(A) had decided the issue in a summary manner without passing a speaking order. Further we also find that while deciding the issue in favour of the Assessee, no remand report was called from A.O. We therefore feel that in the interest of justice and fair play, the submission made by the Assessee before CIT(A) needs to be re-examined. We therefore remit the issue to the file of CIT(A) to decide the issue afresh after considering the submissions of the Assessee and after obtaining remand report from A.O. Needless to state that CIT(A) shall grant adequate opportunity of hearing to both the parties. Assessee is also directed to promptly submit all the required details and any additional evidence that it may be want to rely. Thus this ground of Revenue is allowed for statistical purposes. 23. In the result, the appeal of Revenue is partly allowed for statistical purposes and the appeal of Assessee is dismissed. ITA No. 2659 2703/AHD/2010 (Shri Rajeshbhai D. Prajapati). 24. The grounds raised by the Revenue reads as under: 1.On the facts and in the circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gains disclosed by the appellant. The taxation of the amount of ₹ 10,95,741/- being the income from sale of a capital asset may please be directed to be assessed as income from sale of capital asset as capita! gains instead of business income. 3. The Ld. Commissioner of Income Tax (Appeals)-ll, Baroda has erred in law and in facts in holding that the purchase of land of Revenue Survey No. 1280 was the property of the partnership firm M/s. Satyanarayan Traders and was reflected in the accounts and balance sheet of the partnership firm. 4. The Ld. CIT(A) further erred in law and in facts in holding that by recasting the accounts / balance sheet of M/s. Satyanarayan Traders, the investment in the purchase of land at Revenue Survey No. 1280 is transferred to the account of the appellant and, therefore, even though the said land was purchased in the year 1992, was to be treated as a business asset and the profit on its sale amounting to ₹ 26,26,025/- was to be taxed as business income as against capital gains disclosed by the appellant. The taxation of the amount of ₹ 26,26,025/- being the income from sale of a capital asset may please be directed to be asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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