ITO, New Delhi v. M/s Kalpano Promoters and Finance Ltd.,, New Delhi

ITA 3193/DEL/2009 | 2006-2007
Pronouncement Date: 03-02-2010 | Result: Allowed

Appeal Details

RSA Number 319320114 RSA 2009
Bench Delhi
Appeal Number ITA 3193/DEL/2009
Duration Of Justice 6 month(s) 21 day(s)
Appellant ITO, New Delhi
Respondent M/s Kalpano Promoters and Finance Ltd.,, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 03-02-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted D
Tribunal Order Date 03-02-2010
Date Of Final Hearing 03-02-2010
Next Hearing Date 03-02-2010
Assessment Year 2006-2007
Appeal Filed On 13-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: D NEW DELHI BEFORE SHRI C.L.SETHI JM AND SHRI SHAMIM YAHYA AM ITA NO. 3193/DEL/2009 A.Y. 2006-07 THE I.T.O. WARD 5(1) VS. M/S KALPANO PROMOTERS & FI NANCE P.LTD. NEW DELHI E-26 PANCHASHEEL PARK NEW DELHI 17 (APPELLANT) (RESPONDE NT) APPELLANT BY : SH.BK GUPTA SR.D.R. RESPONDENT BY : SH. ASHOK GARG ADV. O R D E R PER SHAMIM YAHYA ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORDE R OF LDCIT(A) DATED 8.5.09 PERTAINING TO A.Y. 2006-07. 2. THE ISSUE RAISED THAT THE LDCIT(A) ERRED IN LAW BY TREATING PROFIT OF RS. 42 00 402/- EARNED ON SALE OF PLOT AS CAPITAL A SSET U/S 2(14)(III) OF THE I.T.ACT. 3. IN THIS CASE THE A.O. NOTED THAT THE ASSESSEE IS A COMPANY. AS PER THE MEMORANDUM OF ASSOCIATION THE MAIN BUSINESS OF THE COMPANY WAS OF BUILDERS GENERAL AND GOVERNMENT CONTRACTORS ETC . DURING THE YEAR UNDER CONSIDERATION ASSESSEE COMPANY HAS DECLARED A PROFIT OF RS. 42 00 402.80 EARNED ON SALE OF AGRICULTURAL LAND AT VILLAGE BHONDSI AMOUNTING TO RS. 63 72 500/-. THE ASSESSEE CLAIMED THAT THE GAINS 2 REALIZED BY IT ON SALE OF ITS AGRICULTURAL LAND WE RE EXEMPT FROM TAX AS THE AGRICULTURAL LAND WHICH WAS BEYOND 8 KM OF ANY MUNI CIPAL LIMIT IS NOT A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) O F THE INCOME TAX ACT. THE AO RECORDED THE STATEMENT OF THE DIRECTOR OF TH E COMPANY NAMELY SHRI JAI KUMAR TREHAN WITH REFERENCE TO THE MANNER OF DISCLOSURE OF THE LANDS IN THE BALANCE SHEET. THE A.O. OPINED THAT T HE LAND IN QUESTION WAS THE STOCK-IN-TRADE OF THE ASSESSEE AND THEREFOR E GAIN ON SALE OF THE LAND WAS LIABLE TO TAX AS BUSINESS INCOME AND THERE FORE LIABLE TO TAX AS SUCH FOR THE FOLLOWING REASONS: A. . BALANCE SHEET OF THE ASSESSEE COMPANY FOR 31. 3.2006 AND 31.3.2005 WHEREIN LAND AND CONSTRUCTION EXPENSES O THE FARM LAND IS SHOWN AS RS. 78 42 027/- UNDER CURRENT ASSETS WH ICH APPARENTLY MEANS THAT THIS WAS HELD AS STOCK OF THE COMPANY T HERE IS NO AMOUNT ENTERED AGAINST FIXED ASSETS OR INVESTMENTS IN THE BALANCE SHEET PARA 4 OF THE ASSESSMENT ORDER. B. .. EXPLANATION PROVIDED IS AN AFTER THOUGHT AND HAS NO RELEVANCE BECAUSE OVER THE PERIOD OF TIME THE TREAT MENT FOLLOWED BY THE ASSESSEE COMPANY IN ITS BOOKS OF ACCOUNT IS TO TAKE THE LAND AS STOCK IN TRADE AND NOT AS INVESTMENT OR FIXED/CAPIT AL ASSETS. IT IS ONLY IN THE YEAR UNDER CONSIDERATION WHEN THE ASSES SMENT IS BEING DONE U/S 143(3) THE ASSESSEE IS TRYING TO CHANGE TH E STAND WHEN SPECIFICALLY ASKED TO CLARIFY HOW THE PROFIT EARNED AS PER PROFIT & LOSS A/C HAS BEEN CLAIMED AS EXEMPT. (PARA 5 OF THE ASSESSMENT ORDER.) C. BECAUSE THE ASSESSEE GOT HIS ACCOUNTS AUDITED U/S 4 4AB (PARA 5.1 OF THE ASSESSMENT ORDER.) D. THE CONTENTION OF THE ASSESSEE IS NOT TENABLE THAT THE LAND WHICH HAS BEEN HELD AS STOCK IS BEING CLAIMED AS CAPITAL ASSET TO TAKE 3 ADVANTAGE OF EXEMPTION ON THE PROFITS EARNED THERE FROM IGNORING THE PRINCIPLES OF CONSISTENCY AS FOLLOWED IN EARLIER YE ARS. THEREFORE THE SALE OF LAND IS HELD TO BE TREATED AS SALE OF STOCK HELD BY THE COMPANY AND NOT AS AGRICULTURAL LAND AS SPECIFIED I N S.2(14) OF THE I.T.ACT 1961. (PARA 5.2 OF THE ASSESSMENT ORDER. ) 4. ON ASSESSEES APPEAL THE LDCIT(A) REFERRED TO TH E ASSESSEES SUBMISSIONS. HE OBSERVED THAT THE ASSESSEE COMPANY HAS ACQUIRED 1 ST PARCEL OF LAND (PART OF WHICH WAS SOLD IN THE YEAR UNDER CONSIDERATION) FROM 2.11.1995 TO 6.11.1995 AGGREGATING TO 1030 MA RLA FOR TOTAL COST OF RS. 20 29 297/-. HE FURTHER NOTED THAT DURING THE F.Y. 1998-99 A PART OF THIS LAND COMPRISES OF 144 MARLA WAS HANDED OVER T O PANCHAYAT FOR CONSTRUCTION OF ROAD LEAVING BALANCE LAND AT 886 M ARLA. THE ASSESEE HAD TO INCUR RS. 22 300/- FOR THIS ACTIVITY. LATER ON DURING F.Y. 2002- 2003 AN EXPENDITURE OF RS. 1 59 766/- WAS INCURRED ON BOUNDARY WALL. THE CIT(A) FURTHER NOTED THAT THE ASSESEE COMPANY P URCHASED SECOND PARCEL OF LAND WHICH WAS NOT VERY FAR FROM THE FIRS T PARCEL OF LAND ON 6.11.95 COMPRISING OF 436 MARLA FOR AGGREGATE CONSI DERATION OF RS. 9 15 656/-. EXPENSES WERE INCURRED ON THIS PARCEL OF LAND FOR CONSTRUCTION OF FARM HOUSES IN VARIOUS YEARS. AFTER ACCEPTING THESE SUBMISSIONS THE LDCIT(A) PROCEEDED TO ADJUDICATE AS TO WHETHER THE SALE OF PORTION OF FARM LAND IS TO BE BROUGHT TO TAX. T HE LDCIT(A) NOTED THAT THE SAID FARM LAND WAS SITUATED BEYOND 8 KMS OF THE LIMIT OF MUNICIPALITY. REFERRING TO THE SEVERAL CASE LAWS T HE LDCIT(A) CAME TO THE 4 CONCLUSION THAT THE FARM LAND SOLD BY THE ASSESEE C OMPANY CANNOT BE SAID TO BE CAPITAL ASSET AND ACCORDINGLY IT COULD N OT BE LIABLE TO ANY TAX. HE FURTHER ACCEPTED THAT IT WAS A MISTAKE ON THE PA RT OF THE ASSESEE TO SHOW THE ASSET FARM LAND UNDER CURRENT ASSET AS W ORK-IN-PROGRESS. THE LDCIT(A) CONCLUDED AS UNDER. THUS I HOLD THAT THE FARM LAND SOLD UNDER CONSIDE RATION DOES NOT LOOSE ITS CHARACTER OF AGRICULTURE LAND FO R THE PURPOSES OF ITS TAXABILITY UNDER THE ACT MERELY BY ITS DISCLOSURE IN THE BALANCE SHEET AS WORK-IN-PROGRESS UNDER THE HEAD CURRENT ASSETS. THE SAID FARM LAND SOLD CANNOT BE OTHERWISE SAID TO BE STOCK-IN-TRADE IN TERMS OF THE CHARACTERISTICS ATTRIBUTED TO STOCK-IN-TRADE IN COM MON PARLANCE. THE SAID FARM LAND SOLD BY THE ASSESSEE COMPANY SATISFIES ALL THE STIPULATIONS CONTAINED IN THE ACT FOR CLAIMING THE BENEFITS AS AGRICULTURAL LAND BEING NOT A CAPI TAL ASSET IN TERMS OF S.2(14). THE AO IS THEREFORE DIRECTED T O ALLOW THE RELIEF CLAIMED BY THE ASSESSEE IN THIS ACCOUNT. THE ALTERNATIVE ARGUMENTS PUT FORTH BY THE LD.A.R. OF THE ASSESSEE COMPANY ARE NOT ANALYSED IN THIS ORDER FOR THE REASONS THAT THE CONTENTION OF THE ASSESSEE COMPANY FOR NON TAXABILITY OF SALE PROCEEDS OF FARM LAND HAS ALREAD Y BEEN ACCEPTED IN THE FOREGOING PARAGRAPHS. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. THE ASSESSEE HAS ALSO SUBMITTED IN TERMS OF RULE 27 OF ITAT RULES THAT ASSESSEES FOLLOWING GROUND HAS NOT BEEN DECIDED B Y THE LDCIT(A). THE GAINS ON SALE OF AGRICULTURAL LAND IN QUESTION WHICH WAS MORE THAN 8 KMS FROM ANY SPECIFIED MUNICIPALITY ETC . WAS 5 AGRICULTURAL INCOME AND HENCE WAS NOT TAXABLE UNDER INCOME TAX ACT AS HELD BY BOMBAY HIGH COURT IN THE CASE O F MAMBHAI A.SETH VS. ITO(128 ITR 87). 6. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE REC ORDS. THE LD.COUNSEL OF THE ASSESEE REITERATED THE SUBMISSION S MADE BEFORE THE LDCIT(A). HE CLAIMED THAT THE ASSESSEE HAS ACTUALL Y PURCHASED TWO PARCELS OF LAND ONE PART REMAINED AGRICULTURAL LAN D AND DEVELOPMENT WORK WAS DONE ON THE SECOND PART. HE CLAIMED THAT BY MISTAKE OVER THE YEARS BOTH THE LANDS WERE SHOWN UNDER ONE HEAD AS W ORK-IN-PROGRESS UNDER THE CURRENT ASSET. HE CLAIMED THAT IT WAS ME RELY AN ACCOUNTING MISTAKE ON THE PART OF THE ASSESSEE. HE REFERRED T O SEVERAL DECISIONS IN THIS REGARD WHEREIN IT HAD BEEN HELD THAT ACCOUNTIN G ENTRIES CANNOT BE THE DETERMINATIVES OF THE ACTUAL NATURE OF THE TRAN SACTION. THE LD.D.R. IN THIS REGARD HAS ARGUED THAT THIS ASPECT OF THERE BE ING TWO PARCELS OF LAND WAS NEVER PUT BEFORE THE A.O. HE FURTHER REFERRED TO THE SALE AGREEMENT OF THE SAID LAND ENTERED INTO BY THE ASSESSEE. HE REFERRED TO THE VARIOUS CLAUSES IN AGREEMENT OF SALE. HE REFERRED TO THE F OLLOWING CLAUSES 10 TO 13 THEREON. 10. THAT ALL RELEVANT DOCUMENTS IN ORIGINAL/PHOTO COPIES IN RESPECT OF THE SAID PROPERTY INCLUDING ORIGINAL/PHO TOCOPIES OF TITLE DOCUMENTS ELECTRICITY DEPOSIT RECEIPT HAVE B EEN HANDED OVER BY THE VENDOR TO THE VENDEE. 6 11. THAT ALL THE EXPENSES OF THIS SALE DEED VIZ. S TAMP DUTY REGISTRATION CHARGES ETC. HAVE BEEN BORNE AND PAID BY THE VENDEE. 12. THAT THE VENDOR TO PROVIDE AN ACCESS WHICH HAS BEEN DONATED TO THE PANCHAYAT IN FRONT OF THE SAID PROPE RTY IN ORDER TO PROVIDE FREE AND FAIR ACCESS TO THE VENDEE . 13. THAT A SEPARATE MAINTENANCE AGREEMENT IS ALSO B EING SIGNED HEREWITH THIS SALE DEED FOR THE PROPERTY BET WEEN THE VENDOR AND THE VENDEE . IN THE LIGHT OF THE ABOVE THE LD.D.R. PLEADED THAT THE NATURE OF THESE LANDS IS CLEARLY THAT OF DEVELOPED LAND AND NOT OF AGRICULTURAL LAND. 7. UPON CAREFUL CONSIDERATION WE FIND THAT IN THE ORDER OF THE AO THERE IS NO MENTION REGARDING THE CLAIM OF THE ASSE SSEE OF HAVING BOUGHT TWO PARCELS OF LAND ONE OF WHICH REMAINED AGRICULTU RAL LAND AND ONE OF WHICH WAS BEING DEVELOPED. THE VARIOUS SUBMISSIONS THAT THERE HAD BEEN TWO PARTS OF LAND ARE ALSO NOT BORNE OUT OF TH E ASSESEES BALANCE SHEETS AND PROFIT AND LOSS ACCOUNTS OF A NUMBER OF PREVIOUS YEARS. HENCE IT IS EMANATING THAT THESE FACTUAL ASPECTS W ERE NOT PUT BEFORE THE A.O. HENCE WE FIND THAT THE SUBMISSIONS OF THE ASSE SEE BEFORE THE LDCIT(A) NEED TO BE EXAMINED BY THE A.O. UNDER RULE 46A OF THE INCOME TAX ACT. THE SAID RULE MANDATES THAT IF THE ADDIT IONAL EVIDENCE IS PRODUCED BEFORE THE LDCIT(A). THE A.O. SHOULD HAVE BEEN ALLOWED REASONABLE OPPORTUNITY TO GO THROUGH THE SAME. WE FIND THAT THIS IS A LACUNAE ON THE PART OF THE LDCIT(A). THE HONBLE A PEX COURT IN THE CASE OF KAPURCHAND SHRIMAL VS CIT (AP) 131 ITR 451 HA S HELD THAT 7 APPELLANT AUTHORITY HAS THE JURISDICTION AS WELL AS DUTY TO CORRECT ALL ERRORS IN THE PROCEEDINGS UNDER APPEAL AND ISSUE AP PROPRIATE DIRECTIONS WHERE NECESSARY. ACCORDINGLY WE REMIT THE ISSUE TO THE FILES OF A.O. TO EXAMINE THE ISSUE AFRESH IN THE LIGHT OF SUBMISSION S OF ASSESSEE PUT IN BEFORE THE LDCIT(A). AS REGARDS THE ASSESSEES SUB MISSIONS UNDER RULE 27 OF THE I.T.RULES WE FIND THAT WE HAVE ALREADY R EMITTED THE MATTER TO THE FILES OF THE A.O. THE ASSESEE SHALL HAVE LIBER TY TO RAISE ANY ISSUE BEFORE THE A.O. WHICH HE IS ENTITLED AS PER LAW. 8. IN THE RESULT THE APPEAL BY THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD FEBRUARY 2010. (C.L.SETHI) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTA NT MEMBER DATED: 3 RD FEBRUARY 2010 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) 5.DR 6.GUARD FILE BY ORDER DY. REGISTRAR