TaxTMI 
TaxTMI 
2015 (12) TMI 1235
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....oner of Income Tax (Appeals) has erred on facts and in law in confirming the action of A.O. in assessing the gain of Rs. 20,09,361/- on sale of agricultural land as income from business as against the claim of assessee that the said land is not a capital asset U/s 2(14), hence, not liable to tax. 5. The ld Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the action of A.O. in assessing the agricultural income of Rs. 60,400/- as income from other sources." 2. The first ground of the assessee's appeal is against confirming the disallowance of Rs. 4,20,000/- made of by the Assessing Officer out of salary payment. The assessee is a real estate agent trading in land and plot etc. The assessee filed his return on 31/3/2009 declaring income of Rs. 1,08,28,030/- and had shown agricultural income or Rs. 60,400/-. The case was scrutinized U/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as the Act). The assessee furnished details required by the assessee during the assessment proceedings and also produced accounts book and vouchers etc. which was test checked by the A.O. The assessed claimed salary expenses of Rs. 19,20,000/- at the rate of 1,....
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.... the course of verification by the Assessing Officer made on random basis. He held that the observations made by the Assessing Officer is about 22% of salary payment. Thus, disallowance assessed to be quite reasonable. Accordingly, he confirmed the addition. 4. Now the assessee is appeal before us. The ld AR of the assessee has submitted that the assessee vide letter dated 07/12/2010 has furnished list of 24 persons to whom salary payment were made and explained that no specific duties were assigned to them. He has further reiterated the submissions made by the assessee before the Assessing Officer that employees were engaged in field work like identification of land, its owners, obtaining land records from government offices etc.. The complete postal address of the employees were given inasmuch as all the employees belong to nearby villages and in villages, the house number or name of locality generally does not exist. The assessee filed letter dated 27/12/2010 had explained that four out of ten employees who could not be produced for examination are either out of station or have left the job. The assessee was trying to produce them but due to time constraint, he could not produc....
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....ssessing Officer up to 27/12/2010 had recoded the statement of six persons and no adverse inference had been drawn by him. The other four persons were not made available by the assessee as claimed by him that they left the job and are not traceable. The time given by the Assessing Officer is very short. The ld CIT(A) had not asked the assessee to produce the remaining employees for verification at the time of appellate proceedings. Therefore, we do not find any reason to confirm the addition to this head. Accordingly, we allow this ground of assessee's appeal. 7. The second ground of the assessee's appeal is against confirming the disallowance of Rs. 2,70,000/- made by the Assessing Officer out of commission expenses on estimate basis. The ld Assessing Officer observed that the assessee had claimed total commission expenses at Rs. 10,20,000/-, in cash, for acquisition of land for the three parties of Kolkata. The Assessing Officer asked the assessee to give details of brokerage payment and to produce relevant documentary evidence and vouchers etc. with regard to brokerage payment. The assessee had furnished list of 21 persons to whom the brokerage was paid. The assessee was reques....
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.... argued that same are squarely applicable on this payment also. Thus, he prayed to delete the addition. 10. The ld DR has vehemently supported the order of the ld CIT(A). 11. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee furnished the details of brokerage vide letter dated 17/12/2010 before the Assessing Officer. However, he asked the assessee to produce the four brokers on 27/12/2010 for verification. It is a fact that time given by the ld Assessing Officer was not sufficient. However, the assessee produced two brokers for verification. The details of brokerage have been submitted alongwith letter dated 07/12/2010. The details furnished before the Assessing Officer showed that they are villagers of nearby area who provided the services to make available the land in that area. It is undisputed fact that payments were made in cash on self made vouchers, the ld Assessing Officer had not brought on record any adverse evidence that brokerage payment is not genuine. He simply disallowed the expenses on estimate basis. Therefore, we do not find any reason to confirm the disallowance out of brokerage expenses. Acco....
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....AR of the assessee has submitted that the assessee vide letter dated 27.12.2010 had explained that the expenses have been incurred during the regular course of business to perform the various works as per details submitted before the Assessing Officer. The assessee had declared N.P. rate @ 60.34% which is very much reasonable. The nature of these expenses is such that pakka bills are not possible and therefore payments were made through vouchers. Each payment had been supported by the signature of the recipient on the vouchers and are verifiable. Therefore, the ld CIT(A) was not justified to make disallowance @ 30% out of total expenses. In A.Y. 2009-10 the ld Assessing Officer made disallowance of 20% and 10% out of staff welfare and travelling expenses respectively on the ground that payments had been made in cash without supporting vouchers. However, the ld CIT(A) reduced the disallowance to 10% and 6.34% out of staff welfare and travelling expenses respectively. He further relied on the following case laws:- (i) ACIT Vs. Ganpati Enterprises Ltd. (2013) 142 ITD 118 (Delhi)(Trib.) (ii) CIT Vs. Oracle India (P) Ltd. 199 Taxman 181 (Del) (HC) (Mag.) (iii) Seasons Catering Ser....
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....claimed as exempt. These lands are purely agricultural and recorded as such in the revenue record of the State Govt. The agricultural lands are very well covered U/s 2(14) of the Act, in which capital asset is denied. It is further claimed by the assessee before the Assessing Officer that all the agricultural land were sold as such and not as commercial or residential property as evident from the sale of agricultural land. He has not made any division of land and had not sold any part of the purchased land. Rather he had sole complete land as described in the land purchased document. He further submitted that the agricultural land sold at village Bardod, Tehsil Behror, village Belni Tehsil Behror, village Shahajahanpur Tehisl Behror and village Ghasipura Tehsil Shahpura, which is situated more than 8 km from the respective municipal limits. The agricultural land is not covered within the definition of capital assets U/s 2(14) of the Act. The assessee filed copy of notification dated 06/01/1994, which proved that only Alwar and Jaipur district are notified for the purpose of taxability of agriculture land situated within 8 km from municipal limits. Thus, it was claimed by the assess....
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....m the details of land purchased and sold during the F.Y. 2006- 07 (Annexure-B), it can be seen that the land mentioned at sr. No. (2) was purchased from Shri Dayanand, Behror on the basis of agreement only for Rs. 12,25,000/- which was acquired by RIICO for Rs. 43,60,000/- and the compensation was received by Shri Dayanand, Behror, who transferred this amount to the assessee Shri Balbir Singh in view of the said agreement. The nature of this transaction clearly shows that this purchase and sale was not at all of agricultural in nature. During the period relevant to assessment years 2007-08 and 2008-09 the assessee has purchased/sold number of immovable properties the details of which were enclosed as Annexure-C and Annexure-D, which itself shows that the assessee has been doing these transactions as business on regular basis. The assessee himself is a Real Estate Agent for the last so many years and earning lot of brokerage income on account of purchase of agricultural land from local farmers, by industrial houses, in view of the well known on-going industrial development in Behror, Neemrana and Shahjanpur on NH-8 in Behror Tehsil of Alwar district. It is also well known that due ....
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....d from Delhi, Mumbai, Chennai, Pune etc. for commercial purpose and not for doing any agricultural operations. (iv) The appellant himself has not done agricultural operations on these lands and the period of holding has been small. The mere fact that the nature of land in revenue record is agricultural would not mean that it was being used for the purpose of agriculture. (v) the A.O. has relied upon decision cited at (a) State of U.P. Vs. Nand Kumar Agarwal, AIR 1998 (SC) 473, 476, (b) Khan Bahadur Ahmed Alladin & Sons Vs. CIT 68 ITR 573 (SC) (c) Janki Ram Bahadur Ram Vs. CIT 57 ITR 21 (SC) (d) 139 ITR 916 (MP). The AR has mainly relied on the submission that these agricultural lands were covered by the provision of Section 2(14) of the IT Act in which capital asset is defined and since all the agriculture lands were sold as such and not as commercial or residential property, the income from such sale is not liable to be taxed as business income and further the capital gains is also not attracted. It has been submitted that in A.Y. 2008-09, only one land purchased from Nirmal Rani held for 1 to 2 months, was sold in part to three persons. Other four lands were sold without....
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....e books of accounts & other circumstantial evidences. In the present case, assessee has purchased the land as an investment which is evident from the fact that in the Balance Sheet, he has declared these lands under the heading "Fixed Assets". As on 31.03.2005, assessee was holding only two properties under the head Fixed Assets. In F.Y. 05-06 i.e. A.Y. 06-07, he purchased 9 more properties out of which one was sold & the remaining 8 along with the two properties purchased in last year was shown as "Fixed Asset" as on 31.03.2006. In F.Y. 06-07, i.e. A.Y. 07-08, assessee purchased some more properties. Out of the properties purchased during the year and in earlier year, some of the properties were sold and the remaining properties were shown under the heading "Fixed Asset" as on 31.03.2007. Similarly in F.Y. 07-08, i.e. A.Y. 08-09, some more properties were purchased, some are sold and the remaining properties were shown under the heading "Fixed Asset" as on 31.03.2008. From the same, it is evident that assessee has acquired the immovable property as investment & not as stock in trade. Further, whenever he sold any property, it is reinvested in purchase of another property. He has m....
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....tention of the assessee was to trade in land? The profit motive under lies any investment and cannot be taken to be the sole criteria for deciding whether the gains made from short term realization of investments were business in nature. At best, the sale of land within a period of a year can be treated as short term capital gain in assessee's hands. Further, selling the land in parts (only one land mentioned at S.No. 4) cannot be criteria for holding that assessee's activity is an adventure in the nature of trade. Reliance is placed in case of CIT Vs. Harjit Singh Sangha (2013) 217 Taxman 201(P&H) (HC)(Mag.) wherein land purchased by assessee was registered in land revenue records as agricultural land, and it was being used by assessee as such. Later on, it was sold in small plots to different purchaser. No development of land was made by assessee prior to its sale. It was held that assessee's activity could not be termed as an adventure in the nature of trade and gain/profit arising from sale could not be taxed as business income. The assessee is regularly doing the transaction of purchase and sale of agricultural land, year after year. In A.Y. 07-08, assessee purchased 4 pieces....
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....ere should be agricultural activities performed on the said land. Whether the land is an agricultural land or not would depend on its classification in the revenue records. There is no dispute as to the fact that the lands were classified as agricultural land in the revenue records. The condition of user of land for agriculture purpose is for claiming deduction u/s 54B and not for determining whether it is a capital asset or not u/s 2(14). Therefore, once a land is classified in the revenue records as an agricultural land and it is situated beyond 8 kms of the municipal limit, it would remain an agricultural land even if no agricultural activities is performed on the said land. Conversely, if on an industrial/commercial/residential land, agricultural activities are carried out the same would not become an agricultural land. The decision of Delhi High Court in case of Hindustan Industrial Resources Ltd. Vs. ACIT 335 ITR 77 and of Bombay High Court in case of CIT Vs. Smt. Debbje Aleno 331 ITR 59 on this issue is fully applicable. From the details of land purchased and sold in A.Y. 07-08 (Annexure B), it can be seen that land mentioned at S.No. 2 was purchased from Sh. Dayanand on th....
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....e to the return from agricultural cultivation would not mean that purchase or sale of the land is with a motive of earning profit and not to realize the capital appreciation. 4. It may be noted that only because agricultural activities were not carried out or that the person to whom the land was sold has no intention to carry out the agricultural activities on the land sold or that the land is sold within a short period would not mean that the agricultural land held by the assessee is not for investment but for adventure in the nature of trade. In various cases, it has been held that this is not a decisive factor to held that gain from sale of such land is to be assessed as business income. He relied on the following case laws: (i) Hindustan Industrial Resources Ltd. Vs ACIT [2011] 335 ITR 77 (Delhi) (HC) (ii) CIT v Smt. DEBBJE ALENO [2011] 331 ITR 59 (Bom) (iii) Smt. Supriya Kanwar Vs. ITO (2014) 149 ITD 1 (Jodhpur) (Trib.) (TM) 5. CIT(A) has relied on the decision of ITAT Mumbai Bench in case of Ratanshi Mulji Patel Vs. Department of Income Tax in ITA No. 5499/Mum/2011 for A.Y. 08-09 dt. 18.07.2012. However, this decision considering the decision of two High....
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.... sale of agricultural land. The assessee had shown separately brokerage income earned on trading of land as business income. All the purchases and sales of the agricultural land beyond 8 km from the municipal area had been shown in the fixed assets as investment not in stock in trade. The assessee's case has scrutinized continuously and in past also these additions were made by the Assessing Officer but the Coordinate Bench has set aside the issue to the Assessing Officer. It appears that the Coordinate Bench also not accepted the revenue's plea. Further in A.Y. 2007-08, the assessee had shown exempted capital given of Rs. 83,11,740/-, which has been accepted by the Assessing Officer himself as the assessee has drawn attention on page No. 31 to 33 of paper book wherein copy of assessment order for A.Y. 2007-08 enclosed which shows that there is no addition made by the Assessing Officer under this head but during the year under consideration, the ld Assessing Officer held the same exempted income as business income. The rule of res judi cata is not applicable in the case of income tax proceedings but the Hon'ble Supreme Court in the case of Radhaswami Satsang Vs. CIT 193 ITR 321....