Shri Mukesh Mahipatlal Shah, L/R of Late Shri Mahipatlal K. Shah,, Surendranagar v. The Deputy Commissioner of Income Tax, Surendranagar Circle,, Surendranagar

ITA 111/RJT/2009 | 2004-2005
Pronouncement Date: 21-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 11124914 RSA 2009
Assessee PAN ADRPS4913Q
Bench Rajkot
Appeal Number ITA 111/RJT/2009
Duration Of Justice 2 year(s) 4 month(s) 19 day(s)
Appellant Shri Mukesh Mahipatlal Shah, L/R of Late Shri Mahipatlal K. Shah,, Surendranagar
Respondent The Deputy Commissioner of Income Tax, Surendranagar Circle,, Surendranagar
Appeal Type Income Tax Appeal
Pronouncement Date 21-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 21-07-2011
Date Of Final Hearing 06-07-2011
Next Hearing Date 06-07-2011
Assessment Year 2004-2005
Appeal Filed On 03-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.111/RJT/2009 (ASSESSMENT YEAR 2004-05) LATE MAHIPATLAL K SHAH VS DY.CIT SURENDRANAGAR CI RCLE L/H MAHESH MANIPATLAL SHAH SURENDRANAGAR C/O M/S NEWAGE INDUSTRIES AMBAWADI INSDL ESTATE SURENDRANAGAR PAN : ADRPS4913Q (APPELLANT) (RESPONDENT) APPELLANT BY : WRITTEN SUBMISSION RESPONDENT BY: SHRI AVINASH KUMAR O R D E R PER N.R.S. GANESAN JM THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(A)-XVI AHMEDABAD DATED 30-01-2009 AND PERTAINS TO ASSESSM ENT YEAR 2004-05. 2. NO ONE APPEARED FOR THE ASSESSEE IN SPITE OF ISS UE OF NOTICE. HOWEVER THE ASSESSEE HAS FILED WRITTEN SUBMISSION. THEREFO RE WE HEARD THE LD.DR AND PROCEED TO DISPOSE OFF THE APPEAL AFTER CONSIDERING THE WRITTEN SUBMISSION FILED BY THE ASSESSEE. 3. THE FIRST GROUND OF APPEAL IS WITH REGARD TO THE ADDITION OF RS.5 40 000 U/S 68 OF THE INCOME-TAX ACT. THE ASSESSEE CONTENDED I N THE WRITTEN SUBMISSION THAT FROM ASSESSMENT YEAR 2000-01 TO ASSESSMENT YEA R 2004-05 THE REVENUE ACCEPTED THE AGRICULTURAL INCOME DISCLOSED BY THE ASSESSEE. FOR THE ASSESSMENT YEAR 2003-04 THE AGRICULTURAL INCOME DIS CLOSED AT RS.7 68 000 WAS ACCEPTED IN AN ORDER PASSED U/S 143(3) OF THE ACT. THEREFORE THE ASSESSEE CONTENDED IN THE WRITTEN SUBMISSION THAT IT MAY NO T BE CORRECT TO SAY THAT THERE WAS NO AGRICULTURAL INCOME FOR THE YEAR UNDER CONSI DERATION. ITA NO.111 /RJT/2009 2 4. ON THE CONTRARY SHRI AVINASH KUMAR THE LD.DR S UBMITTED THAT THE SOURCE OF AGRICULTURAL INCOME IN EARLIER ASSESSMENT YEAR W AS NOT EXAMINED BY ANY OF THE REVENUE AUTHORITIES DOES NOT MEAN THAT FOR THE YEAR UNDER CONSIDERATION THE ASSESSING OFFICER HAS TO ACCEPT THE AGRICULTURAL IN COME AS DISCLOSED. ACCORDING TO THE LD.DR EACH YEAR IS INDEPENDENT AND THEREFOR E THE ASSESSING OFFICER HAS TO NECESSARILY EXAMINE THE AGRICULTURAL INCOME. ACCOR DING TO THE LD.DR THE ASSESSEE CLAIMED THAT HE CULTIVATED COTTON IN 5.94 HECTARES. ADMITTEDLY THE LAND HAS NO IRRIGATION FACILITY. THEREFORE THE ASSESSI NG OFFICER ON THE BASIS OF THE INFORMATION AVAILABLE ESTIMATED THE INCOME AT RS. 66 873. AFTER MEETING THE EXPENDITURE THE ASSESSING OFFICER FOUND THAT THE A SSESSEE CANNOT HAVE INCOME FROM AGRICULTURE OVER AND ABOVE RS.40 000. ACCORDI NGLY THE BALANCE AMOUNT OF RS.5 LAKHS WAS ADDED U/S 68 OF THE INCOME-TAX ACT. 5. WE HAVE CONSIDERED THE WRITTEN SUBMISSION OF THE ASSESSEE AND THE SUBMISSIONS OF THE LD.DR. ADMITTEDLY THE ASSESSEE HAS SHOWN INCOME FROM AGRICULTURE AT RS.5 40 000. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS DISCLOSED THE EXTENT OF LAND HOLDING; HOWEVER THE ASSESSEE HAS NOT PRODUCED THE SALE BILL OF COTTON AND OTHER DOCUMENTS FOR EXP ENSES FOR EARNING THE AGRICULTURAL INCOME. SINCE THE ASSESSEE COULD NOT PRODUCE SALES BILLS NAMES AND ADDRESSES OF THE PERSONS WHO WERE WORKING FOR THE ASSESSEE AND DOCUMENTS TO SHOW THE EXPENDITURE INCURRED FOR CULT IVATING THE LAND THE ASSESSING OFFICER HAS DISALLOWED THE ENTIRE AMOUNT OF RS.5 40 000. HOWEVER ON APPEAL BY THE ASSESSEE THE CIT(A) FOUND THAT AFTER EXPENDITURE THE ASSESSEE WOULD HAVE EARNED RS.40 000 FOR THE YEAR UNDER CONS IDERATION FROM CULTIVATION OF 5.94 HECTARES OF LAND. BOTH THE AUTHORITIES BELOW FAILED TO KEEP IN MIND THAT THE AGRICULTURAL SECTOR IN THIS COUNTRY IS UNORGANIZED. NO AGRICULTURIST IS MAINTAINING ANY BOOKS OF ACCOUNT. NORMALLY THE AGRICULTURISTS ARE UNEDUCATED. MOREOVER THE AGRICULTURAL LABOURERS ARE ALSO ILLITERATE. WH EN THE STATUS OF OUR COUNTRY IS LIKE THIS EXPECTING AN AGRICULTURIST TO MAINTAIN BOOKS OF ACCOUNT AND PRODUCE COPIES OF THE SALE BILLS FOR SALE OF COTTON IS SOMETHING W HICH COULD NOT HAVE BEEN DONE BY AN ILLITERATE AGRICULTURIST IN THIS COUNTRY. WH EN ESTIMATE OF THE AGRICULTURAL ITA NO.111 /RJT/2009 3 INCOME HAS TO BE DONE ONE CANNOT LOOSE SIGHT OF TH E STATUS OF THE AGRICULTURIST. AT THE VERY SAME TIME IT DOES NOT MEAN THAT THE AG RICULTURAL INCOME DISCLOSED HAS TO BE ACCEPTED AS IT IS. THE ASSESSING OFFICER HAS TO VERIFY THE LAND HOLDINGS OF THE ASSESSEE AREA OF CULTIVATION THE NATURE OF CROP CULTIVATED ETC. THE STATE GOVERNMENT THOUGH ITS REVENUE DEPARTMENT MAINTAINS VILLAGE RECORDS WITH REGARD TO CULTIVATION OF CROP AREA OF CULTIVATION ETC. THEREFORE WHENEVER THERE IS A CONFLICT WITH REGARD TO CULTIVATION AND THE ES TIMATION OF AGRICULTURAL INCOME IT IS VERY ESSENTIAL TO VERIFY WHETHER THE LAND IS ACT UALLY CULTIVATED OR NOT. THE VILLAGE ACCOUNT NO.2 DISCLOSES THE AREA OF CULTIVAT ION AND THE NATURE OF CROP GROWN ON THE FIELD BY EACH INDIVIDUAL. IT IS ALSO NECESSARY TO TAKE INTO CONSIDERATION THE AVERAGE RAINFALL IN THAT AREA AND THE AVERAGE INCOME THAT WAS EARNED BY ORDINARY FARMERS IN THAT LOCALITY FROM TH EIR CROP. WITHOUT EXAMINING ALL THESE ASPECTS BOTH THE AUTHORITIES BELOW REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE COULD NOT PRODUCE THE SALES BILLS AND THE DETAILS OF THE LABOURERS WORKED FOR CULTIVATION. IN THE OPINI ON OF THIS TRIBUNAL THESE DETAILS MAY BE RELEVANT BUT AS DISCUSSED EARLIER IT HAS T O BE FOUND OUT WHETHER THE ASSESSEE HAS ACTUALLY CULTIVATED THE LAND AFTER VER IFYING THE STATE GOVERNMENT RECORDS. SUCH AN EXERCISE HAS NOT BEEN DONE BY THE LOWER AUTHORITY. THEREFORE IN OUR OPINION THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY THE ORDER OF THE LOWER AUTHORITY IS SE T ASIDE AND THE ENTIRE ISSUE OF AGRICULTURAL INCOME IS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE WHOLE ISSUE OF AGRICULTURAL INCOME AND THEREAFTER DECIDE THE SAME AFTER TAKING INTO CONSID ERATION OF THE VILLAGE ACCOUNT NO.2 AND OTHER RELATED DOCUMENTS AND THEREAFTER EST IMATE THE AGRICULTURAL INCOME IF ANY IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADDI TION OF RS.4 10 022. THE ASSESSEE CONTENDED IN THE WRITTEN SUBMISSION THAT T HE ASSESSEE HAS DISCLOSED CAPITAL GAIN ON SALE OF LAND. HOWEVER THE ASSESSI NG OFFICER FOUND THAT PURCHASING OF AGRICULTURAL LAND PLOTTING THE SAME AND SALE OF PLOT IS ADVENTURE IN ITA NO.111 /RJT/2009 4 THE NATURE OF TRADE. ACCORDINGLY THE ASSESSING OF FICER TREATED THE SAME AS BUSINESS INCOME. THE ASSESSEE CLAIMED IN THE WRITT EN SUBMISSION THAT THE AGRICULTURAL LAND WAS PURCHASED IN THE YEAR 1992 AN D AFTER CONVERTING THE SAME INTO SMALL PLOTS THE SAME WAS SOLD IN THE ASSESSME NT YEARS 2003-04 AND 2004- 05. FOR THE ASSESSMENT YEAR 2003-04 THE CIT(A) ACC EPTED THE CLAIM OF THE ASSESSEE AS CAPITAL GAIN. THEREFORE FOR THE YEAR UNDER CONSIDERATION THE INCOME FROM SALE OF THE PLOT CANNOT BE TREATED AS B USINESS INCOME. 7. ON THE CONTRARY SHRI AVINASH KUMAR THE LD.DR S UBMITTED THAT NO DOUBT FOR THE ASSESSMENT YEAR 2003-04 THE CIT(A) FOUND TH AT THE PROFIT ARISING OUT OF SALE OF LAND WAS CAPITAL GAIN. HOWEVER FOR THE YE AR UNDER CONSIDERATION THE CIT(A) DISCUSSED THE FACTS VERY CLEARLY THAT THE LA ND PURCHASED IN THE YEARS 1990 AND 1992 WAS CONVERTED INTO NON AGRICULTURAL LAND I N THE YEAR 1992 ITSELF AND THE PLOTS WERE SOLD. THE PLOTS SOLD IN THE ASSESSMENT YEAR 2003-04 WERE THE LANDS PURCHASED IN THE YEARS 1980 AND 1982. THE CIT(A) F OR THE ASSESSMENT YEAR 2003-04 HAS CONSIDERED ONLY THE LAND PURCHASED IN T HE YEARS 1980 AND 1982 AND HE HAD NO OCCASION TO CONSIDER THE LAND PURCHASED I N THE YEARS 1990 AND 1992. SINCE THE LAND PURCHASED IN THE YEARS 1980 AND 1982 WAS CONVERTED INTO SMALL PLOTS AFTER 10 YEARS IN THE YEARS 1990 AND 1992 TH E CIT(A) FOUND THAT THERE WAS NO INTENTION OF DOING BUSINESS AT THE TIME OF PURCH ASE. HOWEVER THE LAND PURCHASED IN THE YEARS 1990 AND 1992 WAS CONVERTED INTO SMALL PLOTS IN THE YEAR 1992 ITSELF AND CONVERSION OF THE LAND INTO NON AGR ICULTURAL LAND IN THE YEAR 1992 WITHIN A SHORT SPAN OF TIME IS ONLY WITH AN INTENTI ON TO DO BUSINESS. THEREFORE THE CIT(A) FOUND THAT IN RESPECT OF THE LAND PURCHA SED IN THE YEARS 1990 AND 1992 WHICH WAS CONVERTED INTO NON AGRICULTURAL LAND AND DIVIDED INTO SMALL PLOTS IS AN ACT OF ADVENTURE IN THE NATURE OF TRADE. THE REFORE THE INCOME ARISING FROM SALE OF PLOTS WAS RIGHTLY HELD AS BUSINESS INCOME. 8. WE HAVE CONSIDERED THE WRITTEN SUBMISSION OF THE ASSESSEE AND THE SUBMISSION OF THE LD.DR. AS RIGHTLY POINTED OUT BY THE LD.DR THE CIT(A) VERY CLEARLY FOUND THAT FOR THE ASSESSMENT YEAR 2003-04 THE CIT(A) CONSIDERED THE ITA NO.111 /RJT/2009 5 LAND PURCHASED IN THE YEARS 1980 AND 1982. THE LAN D PURCHASED IN THE YEARS 1990 AND 1992 WAS NOT SUBJECT MATTER OF APPEAL FOR THE ASSESSMENT YEAR 2003- 04. THEREFORE THE CIT(A) HAS NO OCCASION TO CONSI DER THE INTENTION OF THE ASSESSEE IN RESPECT OF THE LAND PURCHASED IN THE YE ARS 1990 AND 1992. NO DOUBT THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF THE LAND HAS TO BE SEEN TO ASCERTAIN WHETHER THE ASSESSEE INTENDED TO DO BUSINESS OR NOT. IN THIS CASE IN THE ASSESSMENT YEAR 2003-04 THE ASSESSEE CO NVERTED THE LAND INTO SMALL PLOTS WHICH WAS PURCHASED IN THE YEARS 1980 AND 198 2. THE LAND PURCHASED IN THE YEARS 1990 AND 1992 WAS CONVERTED IN THE YEAR 1 992 INTO SMALL PLOTS WHICH WAS MADE READY FOR SALE. THEREFORE THE INTENTION OF THE ASSESSEE IS VERY CLEAR THAT THE LAND PURCHASED IN THE YEARS 1990 AND 1992 WAS ONLY FOR THE PURPOSE OF ENGAGING HIMSELF IN THE BUSINESS OF REAL ESTATE. I N OTHER WORDS THE INTENTION OF THE ASSESSEE IS TO DO BUSINESS IN SALE OF LAND. TH EREFORE IN THE OPINION OF THIS TRIBUNAL THE CIT(A) HAS RIGHTLY FOUND THAT THE INC OME HAS TO BE TREATED AS INCOME FROM BUSINESS ACTIVITY. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LOWER AUTHORITY. HIS ORDER IS CONFIRMED. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 21-07-2011. SD/- SD/- (A.L. GEHLOT) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT DT : 21 ST JULY 2011 PK/- COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-XVI AHMEDABAD 4. THE CIT-V AHMEDABAD 5. THE DR I.T.A.T. RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT