9911796707
TMI Blog2022 (10) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... ective arguments for which is necessary records to show the land was agricultural land or non-agricultural land is not clear before us. Assessee not placed on records in rebuttal of the arguments of this argument. Moreover, the arguments of the ld. DR on the provision of section 45(3) read with section 2(14) is also not examined in the absence of the evidence on record. As section 2(14) specific exclude the capital assets being agricultural land whereas section 45(3) deals with the capital assets and ld. CIT(A) have not examined this issue even though the issue was before him and it is appearing in his order. Thus, when agricultural land introduced in the firm under section 45(3) is not in capital asset then how the benefit of section 45(3) can be given to the assessee firm, there is no clear finding in the assessment order whether the land is agricultural land or not and therefore Assessing Officer is directed examine this aspect afresh and decide as to whether in the year of the transfer the land was agricultural land and thereby examine the applicability of the provision of and decided the issue after giving property opportunity to the assessee. In terms of these observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s order sheet entry dated 04.11.2016 was asked to produce, partner of the assessee firm, for verification of capital introduced during the year with source of this capital. And vide para (iv) of AO s order sheet entry dated 04.11.2016 the AR of the assessee firm was asked about other liabilities of Rs. 19,19,50,000/- which the assessee firm has shown and to verify the source of the investment from Shri Ram Chandra. Thus, the ld. AO has raised two issue and the same is discussed by him in his order and the related facts is also discussed here in below for the sake of brevity of the facts of the case on hand. 4. The assessee has introduced new capital of Rs 6,62,50,000/- during the year under consideration. During the course of assessment proceedings, the AR of the assessee vide para (ii) of his office note sheet dated 04.11.2016 was asked to produce Sh. Ram Chandra Gurjar, Partner of the assessee firm, for verification of capital introduced during the year with source of this capital. And vide para (iv) of AO s office note sheet dated 04.11.2016, the AR of the assessee firm was asked about other liabilities of Rs. 19,19,50,000/-, which the assessee firm has shown and to verify th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The ld. AO was of the view that the assessee has not furnished the documents in support of his investment as capital assets of Rs.6,62,75,000/- and other liability of Rs.19,19,50,000/- shown in the name of Sh. Ram Chandra Gurjar. As mentioned above the assessee has submitted introduction of the capital by Ram Chandra Gurjar was in form of agricultural land belongs to him and also further furnished the documents of agricultural land acquired by him. For justification of value taken by the assessee firm, a letter to the Sub Registrar Neemrana was issued for furnishing the details of cost/ valuation of agriculture land which was introduced as capital assets in firm by the partner of the assessee in this regard the Sub Registrar, Neemrana provided the DLC rates of agricultural land with effective from 06.09.2013. As per details provided by the Sub Registrar, Neemrana the value of agriculture land (Sinchit) situated at Junaksinghpur Neemrana is Rs 79,59,000/- per bigha. As per DLC rate the total value of agriculture land 5.20 Bigha comes to Rs. 4,13,86,800/- out of which value of 25% share as per sub registrar valuation is comes to Rs. 1,03,46,700/- whereas the partner of the Shri Ram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn as other fictitious liability of Rs.19,19,50,000/-. As mentioned above the assessee has submitted the introduction of that liability as against the transfer of the agriculture land belongs to him and also further furnished the documents of agriculture land acquired by him during the F.Y. 2001-02 to F.Y. 2005-06. As regard source of that other liability from transfer of agriculture land no documentary evidence of valuation of cost and justification as to the value of amount declared by the assessee in his balance sheet may be considered. As per value provided by the Sub Registrar, Neemrana the value of total agriculture land(Sinchit) transferred is Rs 79,59,000/- per bigha As per the DLC rate the total value of agriculture land 5.20 Bigha comes to Rs. 4,13,86,800/- out of which 75% share has booked as other liability which valued is Rs.3,10,40,100/- whereas the partner of the assessee firm Shri Ram Chandra Gurjar has booked an amounting to Rs.19,19,50,000/- as other liability to the assessee firm 75% as per balance sheet as huge fictitious value shown by the assessee to manipulate the avoiding the tax liability in the case. The details of the value of agriculture land adopted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hander had obtained the license to develop it as a resort. 6. That the total value of land contributed by Sh. Ram Chander was valued at Rs.26.5 crores. That out of this value, an amount of Rs. 6,62,50,000/- was contributed as partners capital and remaining amount of Rs. 19,19,50,000/- stands as liability in the hand of firm which the partner Sh. Ram Chander will get back in due course. 7. That during the course of assessment proceedings, the A.O has got the DLC rate of the property contributed by Sh. Ram Chander from the Sub- Registrar, Neemrana. As per the DLC rate the value per bigha was determined at Rs.79,59,000/-. The A.O has taken the DLC value of the property to determine the capital introduced by way of contribution of the said property at Rs. 1,03,46,700/- and thereby making addition of Rs. 5,59,28,300/- as excess value introduced in the partner's capital as unexplained capital introduced. 8. That the appellant has submitted that nowhere in the Act has given liberty to A.O to make an addition on account of higher valuation than the DLC and construing the difference in valuation between the DLC rate and the valuation as per books of accounts as unexplained. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of accounts shall be deemed to be the full value of consideration. In this case, the value of the asset as recorded in the books of accounts is Rs.6,62,50,000/-. Therefore, A.O is not justified in taking the DLC value rather the value as recorded in the books of accounts. Even otherwise, I do not see any justification in holding the higher value of the land asset introduced as partner's capital as unexplained investment in the hand of the firm. I have also taken into consideration various obligation to be fulfilled by the partner Sh. Ram Chander with respect to the land assets committed to the partnership firm. It is not only the market value of land but also the conversion charges which has been borne by Sh. Ram Chander. Thus, there are 3 aspects to be taken into account while deciding about the correct valuation of the land transferred to the firm; 1. Market value as per the DLC rate Rs. 5,59,28,300/-. 2. Conversion charges amounting to Rs. 5,31,59,347/ 3. Various obligations to be discharged by Sh. Ram Chander as per the JV agreement. As per the JV agreement following obligations are also to be discharged. The relevant part of the JV agreement is repro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and will be vested into partnership and it becomes the exclusive domain of partnership firm, the right to part with possession, to sell or to create third party interest in any manner of the said land will only be vested with the partnership firm and no partner in its individual capacity can do so until or unless there is a written consent by the other partner in this regard. 3.2 That it has been agreed and assured by the second party that he shall obtain the permission to develop the said land into Group Housing/commercial, retail and service apartment within one month from the date of the execution of the present deed of JV. 3.3 That it has been agreed and assured by the second party that he shall obtain the relevant permission from the forest authorities, revenue authorities, state authorities and center authorities to remove and/or transfer the plants and trees already in existence in the said land. 5.1 That all the taxes payable in surrendering the license to develop the Resort over 10,000 sq mtrs. Land in the name of second party shall be borne by the second party. 5 5.2 That all the taxes payable in obtaining/procuring the license to develop the Group Housing/com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irayu Estate Dev. Pvt. Ltd. ITA No.263/Mum/2010 in favour of its claim. 5. That the appellant has further submitted that the capital introduction by way of land has been fully explained in the hand of the firm and hence no addition can be made in the firm's hand. 6. That during the appellate proceedings the appellant has claimed that the copy of joint venture agreement was never called for by the A.O hence was not submitted. Now the same has been submitted as additional evidence under Rule 46A of the It Rules, 1962. The appellant's plea was considered and the evidence is taken on record. The same was forwarded to the A.O for his examination and comments. The A.O has submitted the remand report vide letter dated 09/08/2017 which has been considered and the appellant's cross reply dated 01/09/2017 was also considered. 6.4 I have considered the above mentioned facts of the case. In this ground of appeal, the basic issue is the valuation of land contributed as capital and other credits by one of the partner Sh. Ram Chander. The A.O has taken the value as per prevalent DLC rate where as the partner has introduced the value of the land at a mutually accepted valuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant (relevant part of the JV agreement is reproduced at para 5.6 above). 6.5 After due consideration of facts mentioned above along with the provision of section 45(3) of the Act, judicial rulings as stated above and facts of the case including JV agreements and obligations there in, the A.O's action of making addition of Rs.16,09,09,900/- as unexplained liability in the hand of appellant firm is not justified. Accordingly, the addition is deleted and the appellant's ground of appeal on the issue is allowed. 9. Aggrieved from the order of the Commissioner of Income Tax, Appeals-22, Alar the revenue has marched this appeal merely on the two grounds as listed here in above para 2. The ld. DR appearing on behalf of the revenue submitted that the assessee has introduced his land as capital and the same value adopted by the firm is pure arbitral and there is no basis of amount recorded in the books. Not only that why the same is accounted as capital and other liability and there is no mention of the value of the consideration to paid in the joint venture agreement and the amount to be credited in the books as capital and as other liability. The joint venture agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was converted in to the non agriculture (Resort) with effect from 31 May 2006. In the conversion order it was mentioned that if the converted land was not used for the purpose or which it was converted than it will be suo moto reconverted in to agriculture (copy of order attached). So as per the conditions of the conversion order the land was not used for the resort purpose that why it was reconverted in to the agriculture land with effect from 01 June, 2008 . After that the land was transferred t the assessee during the financial year 2013-14. So we are of the opinion that the capital gain tax cannot be imposed on this transaction. Based on these observation the ld. DR argued that it is not cleared as to whether the land in question was agricultural land or non-agricultural land. This fact is not clear from the facts placed on record so far in this proceeding and the issue of land as agricultural land or non-agricultural land is important to decide the benefit sought by the assessee u/s. 45(3) of the Act and therefore the same is required to be verified and for that the same may be set a side to decide this issue in accordance with the law. The ld. DR further submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the exercise of a profession and therefore, even on facts the provision is not applicable. 11. We have considered the rival contentions, perused the material available on record and also gone through the findings of the lower authorities recorded in their respective orders. The bench noted that the grievance of the revenue is that the assessee has introduced the land in the firm books at price of Rs. 26,50,00,000/- as against the DLC rate value of Rs. 4,13,86,800/- and thereby the same is accounted as capital contribution as well as other liability and thereby the value is created much more than the DLC rate in the books of the firm. The ld. AO has added the excess amount of the capital and other liability and the ld. CIT(A) has deleted the said addition considering the valued adopted by the firm in accordance with the provision of section 45(3) and deleted both the additions. Aggrieved from the said order revenue is in appeal that the excess amount introduced as capital and other liability is unexplained money. We have heard the contentions of the both the parties as length and also persuaded the provision of section 2(14), 45(3) and 28(iv) of the Act. The same is extracted h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand ; or (b) in any area within the distance, measured aerially,- (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh. Explanation.-For the purposes of this sub-clause, population means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year; (iv) 6 per cent G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments of the ld. DR on the provision of section 45(3) read with section 2(14) is also not examined in the absence of the evidence on record. As section 2(14) specific exclude the capital assets being agricultural land whereas section 45(3) deals with the capital assets and ld. CIT(A) have not examined this issue even though the issue was before him and it is appearing in his order. Thus, when agricultural land introduced in the firm under section 45(3) is not in capital asset then how the benefit of section 45(3) can be given to the assessee firm, there is no clear finding in the assessment order whether the land is agricultural land or not and therefore Assessing Officer is directed examine this aspect afresh and decide as to whether in the year of the transfer the land was agricultural land and thereby examine the applicability of the provision of and decided the issue after giving property opportunity to the assessee. In terms of these observation the appeal filed by the revenue is allowed for statistical purpose. In the result, appeal of the revenue is allowed for statistical purpose. Order pronounced in the open Court on 07/10/2022. - - TaxTMI - TMITax - Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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