Tribunal partially allows appeal, directs deletion of land sale addition, remands business advance issue for fresh adjudication.

The Tribunal partly allowed the assessee's appeal, directing the deletion of the addition related to the surplus from the sale of agricultural land. The issues regarding the business advance treated as deemed dividend and the non-admission of additional evidence were remanded to the Assessing Officer for fresh adjudication, emphasizing compliance with natural justice principles and procedural adherence. The order was pronounced on August 7, 2019.

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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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