Jamanbhai D. Kalaria Vs DCIT (ITAT Rajkot)
Conclusion: AO was not justified in treating assessee’s transaction of purchase of agricultural land from his wife as colorable device to avoid the legitimate payment of tax on mere difference between purchase price declared by assessee vis-a-vis Jantri Value as assessee had discharged his primary onus by furnishing the necessary details to justify the cost of acquisition and now the onus was on the Revenue to bring on record the details of the cases to justify the actual prevailing market rate at the time of the purchase of land by assessee.
Held: Assessee had purchased a piece of land from his wife (share 33%) and friend’s wife (share 67%). AO was of the view that the transaction representing the purchase of land by assessee from the aforesaid ladies including his wife was the colorable device to avoid the legitimate payment of tax in the hands of assessee. The impugned land was agricultural land which was subsequently converted to non agricultural by the assessee. As such, the gain on the sale of such agricultural land was claimed exempted by the aforesaid ladies under the provisions of section 2(14)(iii)(b) on the sale of the land. Accordingly, assessee had purchased the impugned land at a much higher value in order to generate more capital gain income in the hands of these ladies which was exempted in their hands. Simultaneously, the purchase cost of the land was higher in the hands of the assessee which was adjusted against the subsequent sale of the land after plotting. Thus the entire transaction of purchase of land at a higher price than the Jantri Value was to escape from the payment of alleged tax on the income from the sale of such land after the plotting. In view of the above, AO sought clarification from the assessee for substituting the cost of acquisition declared by the assessee with the Jantri Value. It was held that assessee during the assessment proceedings had justified the purchase price by furnishing the comparable cases but the same was rejected by the AO after pointing out certain defects there in. However, assessee had discharged his primary onus by furnishing the necessary details to justify the cost of acquisition. Now, the onus was on the Revenue to bring on record the details of the cases to justify the actual prevailing market rate at the time of the purchase of land by assessee. But AO had just rejected the contention of the assessee and grossly failed to bring anything on record suggesting that the prevailing market rate at the time of purchase of land was at par with the Jantri Value. Thus, the impugned transaction could not be regarded as colorable device merely on the reasoning that there was no tax liability arising in the hands of the seller being the wife of assessee.
FULL TEXT OF THE ITAT JUDGEMENT
The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals)–IV, Ahmedabad [CIT(A) in short] vide appeal No. CIT(A)-IV/58R/CC-2/12-13 dated 13/11/2013 arising in the assessment order passed under s. 143(3) of the Income Tax Act 1961 (hereinafter referred to as “the Act”) dated 30/01/2013 relevant to Assessment Year (AY) 2011-12.
The Assessee has raised the following grounds of appeal:-
1. The learned Commissioner of Income-tax (Appeals) – IV, Ahmedabad erred in sustaining the addition to the extent of ₹ 26,83,137/-, being 33% out of addition of ₹ 81,30,720/- made by the Assessing Officer on account of income from short term capital gain.
2. The learned Commissioner of Income-tax (Appeals) – IV, Ahmedabad erred in treating a duly registered transaction of purchase of impugned land as a ‘colorable device’.
3. The learned Commissioner of Income-tax (Appeals) – IV, Ahmedabad erred in holding that the appellant reduced short term capital gain in his hands by increasing the cost of acquisition of land.
4. The learned Commissioner of Income-tax (Appeals) – IV, Ahmedabad failed to appreciate that the actual cost of acquisition of land in F.Y. 2009-10 which was duly disclosed in the books has come to be accepted by the Department as part of assessment for A.Y. 2010-11 vide order u/s. 153A of the Act and hence the same could not have been altered by the Assessing Officer in the year of sale of the impugned land by the appellant.
5. The learned Commissioner of Income-tax (Appeals) – IV, Ahmedabad erred in not granting credit for cash of ₹ 15,00,000/- seized on 24-06-2010 as and by way of advance tax payment for the assessment year 2011-12.
6. The learned Commissioner of Income-tax (Appeals) – IV, Ahmedabad erred in directing Assessing Officer to charge interest u/s. 234B of the Act.
The appellant craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal.
2. The first interconnected issue raised by the assessee in ground No. 1 to 4 is that the learned CIT (A) erred in confirming the order of the Assessing Officer by sustaining the addition of ₹26,83,137/- being 33% of the total addition on account of short-term capital gain.
3. The facts in the present case are that the assessee is an individual and engaged in the business of dealing in shares & securities, lands and also drawing salary & share of profit. The assessee has purchased a piece of land in the immediate preceding assessment year dated 20 February 2010 from his wife (share 33%) and friend’s wife (share 67%) as detailed under:
