Case Law Details
ITO Vs Jitendra Shanabhai Patel (ITAT Ahmedabad)
CIT(A) observed that there was no large number of purchase and sale of land by the assessee. In fact, the acquisition of agricultural land owned by the assessee was done by the Government and thus Section 10(37) of the Act are attracted.
As regards consideration of the rural agricultural land acquired by Government for business activity under section 2 (13) of the Act, the same cannot be treated as the adventure in trade. The CIT(A) has given proper finding to that effect.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Revenue and the Cross Objection is filed by the assessee against the order dated 15.09.2017 passed by the CIT(A)-3, Ahmedabad for the Assessment Year 2011-12.
2. The Revenue in its appeal has raised the following grounds of appeal :
“1. The Ld. CIT(A) has erred in law and on facts in deleting the addition made by the AO of Rs.5,57,11,120/- on account of LTCG without considering the finding of the AO that the village Bol, Taluka Sanand, Dist. Ahmedabad has been included in the area of Ahmedabad Urban Development Authority (AUDA) vide notification dated 13.02.2009 of the Government of Gujarat, Urban Development and Urban housing Department, Sachivalay, Gandhinagar.
2. The Ld. CIT(A) has erred in law and on facts in considering the land situated at Bol Village as Rural agricultural land as against the capital asset u/s 2(14)(iii)(a) held by the AO.
3. The Ld. CIT(A) has erred in law and on facts in considering the proof of cultivation of land and subsequent allowing of exempting u/s 10(37) in the form of affidavit of Bhagiya holding the land as agricultural land.
4. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.45,23,520/- made by AO u/s 50C of the Act without appreciating the fact that the assessee himself submitted that due to receipt of post dated cheque regarding balance consideration, the assessee had postponed the final registration of sale executed on 30.03.2011.
5. On the facts and circumstances of the case, the Ld. Commissioner of Income Tax (A) ought to have upheld the order of the Assessing Officer in respect of above issues.
6. It is, therefore, prayed that the order of the Ld. Commissioner of Income Tax (A) may be set-aside and that of the Assessing Officer be restored.”
3. The Revenue has also raised additional grounds of appeal which are reproduced as under :
“1. The Ld. CIT(A) has further erred in law and on facts that the lands purchased by the assessee were not purchased for the purpose of agriculture but were purchased with the knowledge that the said lands were being acquired with the sole intention of earning huge profit on account of their acquisition.
2. The Ld. CIT(A) has failed to appreciate the fact that the transfer of land compulsorily acquired by the Government as business activity prescribed under section 2(13) of the Act as an adventure in trade and considering the surplus arise on the above transfer of land as profit from business and profession.
3. Further, the Ld. CIT(A) has also failed to appreciate that the return of income clearly shows that the main source of the assessee is from house property, salary as Director in a company, capital gains and income from other sources. In past years also, the assessee had not declared any agricultural income. This fact is quite an indicative of intention of the assessee for buying a land in an area where in the industrial growth had rapidly picked up.”
“The Ld. CIT(A) has erred in law and on facts in deleting the addition made by the Assessing Officer of Rs.5,57,11,120/- in as much as the entire activity of the assessee was within the domain of adventure in nature of trade and incident to the business activity as the assessee was involved in a series of transactions of purchasing lands.”
4. The assessee company filed original return of income on 04.01.2012 declaring total income of Rs.13,21,950/-. The case was reopened under Section 147 of the Income Tax Act, 1961 after recording the reasons for re-opening and obtaining satisfaction from the appropriate authority. The Assessee derives income from salary, capital gain and income from other sources. The Assessing Officer made addition in respect of acquisition of land as the Assessing Officer observed that since the date of transfer in the case of the assessee the value of the property as per provision of Section 50C of the Act has to be taken into account as per the value as on 21.05.2011 as adopted/assessed by Stamp Valuation Authority in the case of the assessee. The registered deeds of lands in question which contained the valuation made by the State for the purpose of stamp duty and the valuation made by the Stamp Valuation Authority in registered sale deed is the market value of the lands in question as per the provisions of Section 50C of the Act. Therefore, the Assessing Officer made addition of Rs.45,23,520/-. The Assessing officer further observed that the land in question was within the acquisition proceedings and thus this expenditure cannot be treated as long period investment and, therefore, surplus of Rs.5,57,11,120/- was treated as income from profits and gains of business or profession.
5. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). There is delay of 5 days and the assessee has filed condonation of delay application. The assessee has explained the reasons and the Ld. DR do not have any objection in condoning the delay. Hence, delay of 5 days in filing the appeal is condoned.
6. The Ld. DR submitted that the Ahmedabad Urban Development authority treated the said land as commercial as the said land falls in the Ahmedabad Municipal jurisdiction. Ld. DR further submitted that the assessee is in the business of construction and, therefore, this is income from profits and gain of business or profession in the hands of the assessee.
7. As regards ground no.4, the ld. DR submitted that the CIT(A) erred in deleting the addition of Rs.45,23,520/- made by the Assessing Officer under Section 50C of the Act without appreciating the fact that the assessee himself submitted that due to receipt of post dated cheque regarding balance consideration, the assessee had postponed the final registration of sale executed on 30.03.2011. The Ld. DR further submitted that the sale and purchase of land is within the short span so it is business in the name of adventure trade and provisions of Section 10 (37) cannot be claimed by the assessee. In fact, copy of 7/12 of the land does not indicate that there was any agricultural activity done on the said land. The documents prove that the transaction is purely of commercial land and not that of agricultural land. As regards issue related to claim of section 50C of the Act, the sale deed was registered subsequently and the payment was made prior to registration.
8. Ld. AR submitted that the Assessing Officer as well as the CIT(A) never pointed out that there was number of transaction. In fact from the transactional set up and the particulars of dates it can be seen that the interaction of purchase of land is for personal use only and not for adventure of trade in business activity. In fact, the land was purchased jointly with the other co-owners and the land was agricultural land. The Ld. AR further submitted that all the documents and evidences were before the CIT(A) and hence the CIT(A) has rightly deleted both the additions.
9. We have heard both the parties and perused all the relevant material available on record. As regards to ground nos.1, 2 & 3 and additional ground it can be seen that the CIT(A) observed that there was no large number of purchase and sale of land by the assessee. In fact, the acquisition of agricultural land owned by the assessee was done by the Government and thus Section 10(37) of the Act are attracted. Further evidence shows that the bills for sale of agriculture produce were before the AO and the agricultural operations carried out through Bhagiya and the same were not disputed by the Revenue authorities. Thus, there is no need to interfere with the findings of the CIT(A) and hence ground nos.1, 2 & 3 and additional ground are dismissed.
10 As regards consideration of the rural agricultural land acquired by Government for business activity under section 2 (13) of the Act, the same cannot be treated as the adventure in trade. The CIT(A) has given proper finding to that effect.
11. As regards to claim of section 50C of the Act, the sale consideration has been received before 18.04.2011 and the agreement of sale finalised earlier than that date. Thus, the claim is genuine claim and the CIT(A) has rightly deleted this addition as well. Thus ground no.4 is dismissed.
12. C. O. No.43/Ahd/2019 is in support of order passed by the CIT(A), hence not adjudicated.
13. In the result, appeal of the Revenue is dismissed & C.O. is disposed of.
Order pronounced in the open Court on this 29th day of June, 2022.
