TMI Blog2014 (1) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... f books of accounts - Held that:- No inconsistencies or defects have been pointed out in the books of accounts maintained by the assessee - The assessee has claimed to have carried out agriculture operations and earned agriculture income which is offered in the return of income, which is accepted - Conveyance of sale of land also demonstrates that the land in question was agriculture land - It has not been disputed that the assessee on its own as an independent entity has not carried out any development activity or moved any application for commercial exploitation of the land to any local, state or Central agency - These glaring facts and circumstance do not raise any occasion for rejection of books - In the absence of any worthwhile defect in the books of accounts, rejection of books was unjustified. Whether gain arising from purchase and sale of agricultural land be treated as business income - Held that:- In a big group launching of several corporate entities each company is an independent assessee in the eyes of law - Their activities are to be analyzed on the basis of actual activities and cannot be ignored merely because the associate concern is engaged in some other activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment u/s 144. 1.1. Issues, facts and conclusions being same for both the years, they are disposed of by common order for the sake of convenience. 2. Brief facts are : Search and seizure operations were conducted on 17- 9-2008 in assessee's premises which is referred to belonging to one Basant Bansal, which in turn has been named as sub-group of Kamdhenu Group. During the course of search no surrender of undisclosed income was made in the group. Notice u/s 153A was issued on 9-3-2010. In response thereto the assessee filed same returns as were filed earlier i.e. declaring loss of Rs. 2,73,866/- for A.Y. 2007-08 and loss of Rs. 6,14,908/- for A.Y. 2008-09. 2.1. During both the years the assessee had sold lands claimed to be agricultural lands, which are held as stock in trade. Huge gains on sale of such lands were declared which are claimed to be agriculture lands. Thus, the following gains were claimed by the assessee as exempt as agriculture income: Asstt. Yr. Amount. 2007-08 Rs. 31,40,73,445/- 2008-09 Rs. 5,83,13,400/- 2.2. Assessing officer during the course of assessment u/s 153A proposed as to why instead of exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee , or by any other name) or a cantonment board and which has a population of not less than tea thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or (b) in any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extend of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette;] In view of the above, it is clear that land, which is situated within the jurisdiction of Municipality or Cantonment Board, which has a population of not less than Ten Thousand or land situated in any area within eight kilometers from the local limits of any municipality or cantonment board would be treated as Capital Assets only and would be subject to tax only. Agriculture Land which is outside the jurisdiction of Municipality or Cantonment B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricultural activity on the land. Also, it is nowhere mentioned in the MOA of the company that either main object or ancillary object of the company was agriculture. Moreover, it is not important what is preached but more important is what is professed. In the case of the assessee, it has been seen that the company since its inception in the year 2003-04 has been solely working with the intention to acquire land in and around Gurgaon, Haryana and then either sell it at profit or develop a land project on it. 2.4. The assessing officer then referred to the facts of other 11 companies of the group whose major shareholders and directors are referred to be Shri Basant Bansal and Shri Roop Bansal. According to assessing officer, a holistic view of the facts and circumstances was to be taken which in sum and substance are as follows: (i) The various group companies and the above two persons along with Smt. Abha Bansal and Shri Pankaj Bansal had purchased these lands and the promoters were waiting to strike deal claiming the land to be agricultural land except one company M/s Misty Meadows Pvt. Ltd. which had business other than buying and selling of agricultural land. (ii) Various c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the nature of business, the profit can be taxed". Since it is proved that the intention of the assessee was to earn profit from transaction of purchase and sale of agricultural land, profit earned can be taxed from sale of such agricultural land as business income. (viii) The assessee has treated the agricultural land as Fixed asset in its Books of account, the receipts on sale of it as capital receipt and the resultant profit has been claimed exempt. However, in view of the fact mentioned in paras above, receipt on sale of agricultural land is to be considered as revenue receipt. Assessing officer held that books are incorrectly written and liable to be rejected. It is a well settled principle that the Books of account should be written to give true and fair picture of the affairs of the business of the assessee. Section 145(3) of the LT. Act categorically states that when the AO is not satisfied about the correctness or completeness of the accounts of the assessee or where the method of accounting provided in sub-section (1) of section 145 or accounting standards as notified under sub section (2) of section 145 have not been regularly followed by the assessee, the AO may make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, no addition can be made qua the settled issues. (ii) In any case no addition can be made u/s 153A as no incriminating material was found or relied in this behalf as a result of impugned search. 2.8. CIT(A) apart from various case laws mentioned in the order relied on ITAT Delhi Bench judgment in the case of Shivnath Rai Harnarain (India) Vs. DCIT (2008) 117 TTJ 480, inter alia holding as under: "From reading s.153A and second proviso to s.153A, it is further clear that on the date of initiation of search or requisition under s.132 or s.132A the pending assessment or reassessments relating to any assessment year falling within a period of six assessment years shall stand abated but assessment or reassessments can be done under s.153A of the Act in cases of completed assessments or in cases where assessments have not been framed due to non filing of returns etc. for the abovementioned assessment years even if such assessment made under .153A is not based on material found during course of search The word "abate" or "abatement has not been defined in the Act or in the circular. According to Chambers Dictionary the word "abate means demolition on or to put an end to. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rns of income led by the assessee for all the six years under consideration before the search took lace were processed under Section 143(l)(a) of the Act the provisions of Section 153A cannot be invoked. The Assessing Officer has the power under Section 153A to make assessment for all the six years and compute the total income of the assessee, including the undisclosed income, notwithstanding that the assessee filed returns before the date of search which stood processed under Section 143(1)(a). The other reason given by the Tribunal in the same paragraph of its order that no material was found during the search is factually unsustainable since the entire case and arguments before the departmental authorities as well as the Tribunal had proceeded on the basis that the document embodying the transaction with Mohini Sharma was recovered from the assessee. While summarizing the contentions of the assessee in Paragraph 5 of its order, the Tribunal itself has referred to the contention that no document much less incriminating material was found during the search of the assessee's premises-except one unsigned undertaking for loan. Again in Paragraph 10 of its order, while dealing with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounts u/s 145(3) the AO has observed that the assessee treated the agriculture land as fixed asset in its books of accounts and the receipt on sale of it was shown as capital receipt and the resultant profit has been claimed as exempt. However, as per detailed discussion in the assessment order, the AO came to the conclusion that the books of accounts should be written in manner that they reflect true and correct affairs of the business and that when the AO was not satisfied about the correctness or the completeness of the account of the assessee or where the matter of accounting provided in sub-sec. 1 of sec. 145 or accounting standard as notified under sub. Sec. 2 of sec. 145 have not bee regularly followed by the assessee, the AO may make an assessment in the manner provided in sec. 144 of IT Act. As per AO, the books of accounts of the assessee did not present true and fair picture of account in as much as revenue receipts were claimed as capital receipt and accordingly true income was not reflected. Therefore provisions f 145(3) of IT Act were applied and the income from sale of such land was taxed as business income. 6.8.2 As regards such objection and ground of appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that even in the MOU of the appellant company, there is no any major object or any other minor object for purchasing of agricultural land for agricultural operations. The AO keeping in view overall business transactions and nature of activities of the other sister companies of the appellant group has observed that the sole object of the appellant company is to acquire land in and around Gurgaon in Haryana and sell the same on profit. As per AO, such corroborative facts as also facts gathered from business transactions in respect of purchase of such agricultural land by the sister companies also proved that such transactions by appellant company were definitely of business nature. Relying on such facts including corroborative evidence the AO has held that the conduct of the appellant company as a group indicated that such purchase and sale of agricultural land was-adventure in the nature of trade and therefore surplus amount Rs. 314073445/- arising on such sales in respect of A.Y. 2007-08 was taxed as income from business and profession. Similarly in respect of A.Y. 2008-09, such surplus amounting to Rs. 58928305/- was taxed. On the other hand the appellant's case is that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surplus from such sale of land cannot be taxed as capital gain. he appellant in his detailed written submission has essentially contended that the nature of land at the time of purchase as well as at the- time sale was only agricultural and "that such agricultural land being no capital asset therefore such surplus arising on the sale of such land cannot be taxed. The various case laws referred an relied upon by the appellant also stated to be support such proposition of law. I It may be noted that the whole defense of the appellant is mainly revolving over the facts that the said land is agricultural land not situated in municipal area and such land being not a capital asset therefore not liable to Income Tax particularly capital gain. However as discussed earlier all these facts are not disputed by the AO and in fact the AO has not taxed such surplus simply on the basis of these grounds and the AO's case is that such transactions are of business nature being adventure in the nature of trade and therefore such surplus was taxed under the business head. Therefore essentially it is to be examined whether in the given circumstances the action of the AO to treat such transaction as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of G. Venkat swami Naidu Co. Vs. CIT 35 ITR 594 has held that in cases where purchases have en made solely and exclusively with intention to "resell at a profit and purchaser has no intention of holding property for himself or otherwise enjoying or using it, presence of such an intention is a relevant factor and unless it is obstructed by presence of other factors it could raise a strong presumption that the transaction is an adventure in the nature of trade. The Hon. Gujarat High Court in the case of CIT vs. Premji Gopalbhai (1978) 113 1TR 785 has held that the sole intention to resell at a profit is a strong factor to determine the transaction as adventure in nature of trade. It is held that even if the land which is not a commercial commodity is purchased and it can be shown that the purchase of the land was made solely and exclusively with an intention to resell it at a profit it would be a strong factor to indicate that the transaction would be an adventure in nature of trade. The Hon. MP High court in the case of CIT Vs. Jawahar Development Association (1981) 121 ITR 431 has held that the fact that the land is agricultural land is not relevant and the mere fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not to keep it for agricultural purposes or as an investment but to derive profit-at the earliest possible time. iii) The appellant consist of a group in which there are other corporate entities also and as discussed by the AO the other sister concerns/ companies as also its directors are broadly found to be involved in the business of real estate property. The broad details of such company I individual as discussed by the AO in the assessment order are as under: a) Marigold Merchandise Pvt. Ltd . b) Misty Midows Pvt. Ltd. c) Manglam Multiplex Pvt. Ltd. d) Dignity Buildcom Pvt. Ltd. e) M/s Marhsal Buildcon f) MIs M3M India Ltd. g) Bonus Builders Pvt. Ltd. h) Benchmark Infotech Pvt. Ltd. iv] It may also be stated that the main persons of this group including Sh. Basant Bansal, Sh. Roop Bansal and' other family members also started their career in the business of real estate as land buying agent for M/s EMMAR MGF Group and subsequently by floating many Pvt. Ltd. companies they have expanded their business of real estate to large scale. The companies associated with the appellant company and its directors are definitely found to be engaged in the business of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to a group of companies engaged in real estate business, the gains in question, derived from sales of agricultural land by asssesee amounts to adventure in the nature of trade. Consequently such gains which are otherwise exempt as agricultural income are assessable as business income in assessee's hands. 3.2. Adverting further to facts, ld counsel contends that appellant purchased impugned agricultural land at village Behrampur District Gurgaon Haryana, admeasuring 206 kanal 16 Marlas for Rs. 1,32,51,000/-, which is duly reported with return of income for A.Y. 2006-07. The impugned land has been shown as fixed asset in the books of a/cs which are assessed u/s 143(3). The agricultural land is situated beyond 8 km. from the limit of nearest municipal committee. Out of this agricultural land, the appellant sold 92 kanal 8.50 marla for Rs. 32 Crores in AY 2007-08 and balance in AY 2008-09. The said land was purchased and sold as agricultural land by conveyance which is not disputed by Ld. A.O. by Ld. CIT(A). 3.3. Assessee was searched on 17.09.2008, which lead to impugned assessments which are framed u/s 153A i.e. by way of block assessment for assessing undisclosed income on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no incriminating material found as a result of search. Following case laws are relied upon:- (i) All Cargo Global Logistics Ltd. v. DCIT (2012) 18 ITR (Trib) 106 (Mumbai)(SB) - for the proposition that in assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately. In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. (ii) Gurinder Singh Bawa v. DCIT (2012) 28 Taxmann.com 328 (Mum trib) - for the proposition that where in search assessment under section 153A all assessments pertaining to six immediately preceding assessment years were complete, Assessing Officer cannot make any addition there under unless there is any incriminating material discovered during the search. (iii) Jai Steel In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to our notice regarding any incriminating material having been found during search. Therefore following the Judicial Precedents, we are of the opinion that though assessments for the above year were bound to be reopened but additions could be made only if some incriminating document was found during search. (vi) Tarannum Zafar Khan Vs. ACIT, ITA Nos. 5888 to 5890/Mum/2009 18.3 One more reason is there that most of the additions have been made in the routine manner as the issue has not been discussed in right perspective in taking into consideration the submission and other evidences filed. It is also a matter of fact that no incriminating material was found during the course of search as only during the assessment proceeding, these expenses were found made through credit cards. In view of the above facts and circumstances of the case, we delete the addition of Rs.9,057/-. (vii) Vee Gee Industrial Enterprises vs. ACIT, ITA No. 1/Del/2011 ITA No.2/Del/2011 15.In view of the above, we agree with the contentions of assessee and allow ground no.1 of the appeal. In respect of second ground of appeal regarding disallowance of telephone, car expenses etc we observe that no incrim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 which has become final. The purchase of agriculture land has also been accepted by Ld. A.O at para 3.4(a) at page 4 of the block assessment order. Ld. CIT(A) has also held that it was agricultural land and was not capital asset in para 6.6, page 39, 40, 43 of the appeal order. Ld counsel then referred to following documents placed on paper book to emphasize these facts: (i) PB 29-44 is the copy of purchase deed showing the nature of land as agricultural land. This is part of assessment record u/s 143(3) for A.Y. 2006-07. (ii) PB 45-48 is the sale deed of impugned agricultural land wherein at PB 47 the nature of impugned sold land has been mentioned as agricultural land. (iii) PB 27-28 is the evidence in the form of certificates from Tehsildar certifying the land as agricultural land and further that it is located beyond 8 Km. from municipal area. (iv) PB 59-62 is the copy of girdawari showing the growing of agricultural crop on this land. (v) PB 63-64 is the copy of evidence of sale of agricultural produce. 3.9. It is pleaded that agricultural land situate beyond specified limits of municipal committee, which is not regarded as "capital asset", by legal prescription u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old in kanals and marlas and not in yardage or feet. Neither any plotting was done, nor change of land use (CLU) was applied. Thus looking from any angle there is no iota of evidence or any incriminating material to indicate that there was even any endeavour much less any future intent to use land for non agricultural purposes. The facts and record clearly demonstrate that no real estate development activity was done by the assessee qua impugned agricultural land. 3.13. Before Ld. CIT (A) appellant duly met with and distinguished as well as the A.O's reliance on the decision of Madhya Pradesh High court in the case of CIT Vs. Jawahar Developers 127 ITR 431. 3.14. Reliance is placed on the ratio of decision of Hon'ble Bombay High Court in the case of Manibhai A. Seth Vs. ITO 128 ITR 387, holding in identical facts that the land was agricultural land. 3.15. Hon'ble Delhi High Court in the case of DLF Housing and Construction P. Ltd. Vs. CIT 9 Taxmann 207 (Delhi) observed that burden to prove that a particular transaction is not of agricultural land, squarely lies on revenue and when no steps are taken by assessee to develop the land, it retained its character as agricultural land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not meant for any other purpose what to say any non-agricultural purpose. Further, the sale deeds also mentioned "That the said land has not notified under section 4 or 6 of the Land Acquisition Act, 1984 either for the planned development or for any other purpose" that means the future intend use cannot be other than agricultural purposes viz to undertake any commercial activity that demonstrates, whatsoever, 'Adventure in the nature of trade'. (v) Shri K. Gnaneshwar Dt. 19.12.2012 ITA No.526A/Hyd/2005 : AY 2000-01,ITA No.508/Hyd/2007,ITA No.543/Hyd/2006, ITA No.226/Hyd/2007, ITA No.1407/Hyd/2010, IT(SS)A No.44/Hyd/2009 "para 47 There is no material on record to show that the assessee carried on activities of buying and selling of land in a systematic manner so as to justify the action of the Revenue authorities in treating the activity of the assessee as an adventure in the nature of trade. The land was sold in acreage and not by making plots. In the circumstances, we are of the opinion that the sale of land cannot be considered as an adventure in the nature of trade and income derived from such sale should be treated as agricultural income......Para 57 the nature of land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility to determine the assessee's true income. Books of accounts are audited and in order to willy- nilly reject the books it was done by a presumptuous plea that land ought to have been treated as stock in trade. In umpteen no of assessments, heads of income, nature of expenses from capital to revenue or vice versa are changed. It doesn't imply that AO will reject duly maintained books of accounts in every such case. There was no justification for lower authorities to reject the books just to change the head or interpret the law in their own way. For the sake of arguments even if such agricultural land is treated as business asset yet the gain from it would nonetheless be exempt as agricultural income. 3.19. Further reliance is placed on the ratio of decisions for this proposition in the cases of: - CIT Vs. Sir Kameshwar Singh 3 ITR 305 (PC); - Hindustan Resources Ltd. Vs. ACIT 335 ITR 77 (Del.); - Raja Mustafa Ali Khan Vs. CIT 16 ITR 330 (PC); - CIT Vs. Diwan Bahadur S.L. Mathias 7 ITR 48 (PC); - K. Simrathmull vs. CIT 64 ITR 166 (Mad.); - CIT Vs. Manilal Somnath 106 ITR 917 (Guj.); - Maganlal Morarbhai Vs. CIT 118 ITR 224 (Guj.); and - CIT Vs. Madhabhai H. Paat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive of real estate business of the appellant. In reply, it is submitted that MOA may contain various objectives but what has to be seen on facts as to what has actually been done by the company. Appellant company was undisputably entitled to purchase agricultural land as fixed asset and derive agricultural income there from which has been offered and taxed as agricultural income. Thus, actual activity has to be seen instead what is mentioned in the MOA. MOA's object clause is so comprehensively worded so as to include right from fishing trade to aeroplane manufacturing. Thus, object clause should not be the sole criteria to the utter disregard of the evidence and actual activity undertaken. Reliance is placed on: - ITO Vs. Neon Property P Ltd. ITA no. 1171/Del/2011 dated 13.5.2011; - CIT. vs. PKN Co. Ltd. 60 ITR 65 (SC) Merely because agriculture land was purchased in one year and sold as such in other year, alone is not enough, to term it as activity of business. Objective of best possible earnings from an investment is always there and is not prohibited by any law. There is no proposition of law that investment in agricultural land unless held for a particular number of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial authorities that even real estate companies can hold agricultural land is fortified by following judicial decisions:- - DLF United Ltd. 161 ITR 714(Del), - ITO. Vs. Neon Property P Ltd. ITA no. 1171/Del/2011 dated 13.5.2011 - Delhi Apartments P Ltd. ITA 569/2012 dated 7.3.2013 (Del)(HC) 4. Ld. CIT(DR), on the other hand, apropos jurisdictional issue contends that the case laws relied on by the ld. Counsel for the assessee in the case of Jai Steel India (supra), the facts were different in the sense that in original assessment the assessee had not claimed sales-tax incentives to be capital in nature. After the search in 153A assessment assessee claimed that the assessing officer should now grant deduction thereon, reducing it from the income by treating it to be capital receipt. Ld. DR referred to the question of law in this behalf. In these peculiar facts the decision was rendered rejecting the assessee's claim for reduction of such income. Ld. CIT(A) has in detail considered the plain and unambiguous language of provision of sec. 153A and upheld the assessment. His order is relied on. 4.1. Apropos rejection of books of accounts,, it is contended that it has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the assessee is to be effect that the land in question is outside the specified municipal limits and such land being not a capital asset is not liable to income-tax tax. Assessing officer has not taxed the gains on the basis that purchase and sale of land by the assessee is an adventure in the nature of trade and the surplus is liable to be taxed as business income. As per Sec. 2(13) of the I.T. Act, business includes any trade, commerce or manufacturing or any adventure or concern in the nature of trade. In the case of R. Dalmia 137 ITR 665 the Hon'ble Delhi High Court has held that for determining the nature of the transaction the dominant intention of the assessee is to be seen. 4.5. To determine that assessees venture was in the nature of trade or from a capital investment. Entries in the books of a/cs are not material and the real nature of transaction is to be seen. Reliance is placed on Hon'ble Supreme Court judgment in the case of Kedarnath Jute Manufacturing Co. Ltd. (supra). Similar view has been held in various other case laws relied on by the CIT(A) in his order. It is further pleaded that the MOA of the assessee no where provides that it will be purchasing agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the AO and/or assessee beyond provisions of Sections 139(return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act. 26. The plea raised on behalf of the assessee that as the first provision provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the aid provision in isolation and not I the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of intimation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents." 5.1. The issue is not of the legal challeng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny development activity or moved any application for commercial exploitation of the land to any local, state or Central agency. These glaring facts and circumstance do not raise any occasion for rejection of books. If at all, the assessing officer could have changed the head of income by exercising his assessment power. In the absence of any worthwhile defect in the books of accounts, rejection of books was unjustified. This ground of the assessee is also allowed. 5.4. Coming to the merits of the case, the main allegation of the lower authorities is to the effect that the assessee group taken as a whole was engaged in various activities of real estate development, therefore, an inference has been drawn that the assessee also should be deemed to be engaged in real estate business. In our considered view this assumption has no legs to stand. First of all lower authorities have not demonstrated that the assessee as a group was engaged in dubious and colourable devices. In a big group launching of several corporate entities is permissible by law and each company is an independent assessee in the eyes of law and separately assessed. Their activities are to be analyzed on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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