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RAMESH C PRAJAPATI Versus DY. COMMISSIONER OF INCOME TAX

2015 (8) TMI 1218 - GUJARAT HIGH COURT

Agricultural income - assessee has shown income of ₹ 12,12,220/- being income from agriculture activities but A.O. has considered income of ₹ 7,50,000/- to be as business income - Tribunal reversing the well reasoned order of C.I.T. (Appeals) and in sending the matter back to the Assessing Officer - Held that:- No basis has been spelled out by the A.O. to arrive at the conclusion that out of total income declared by assessee, part of income was business income. We also find that no e .....

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s and the factual position. We find that learned CIT(A) has considered the claim of the assessee of having agriculture income in view of the agriculture land shown at ₹ 1.25 Crore in the balance sheet. During the course of hearing the ld. A.R. Has asked specific question about the total land holding of the assessee, the type of crops grown and what were the irrigation facilities available to which neither the ld. A.R. or ld. D.R. Could furnish any reply. We are therefore of the view that t .....

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to interfere with the same. No error has been committed by the learned tribunal in remitting the issue to the file of learned A.O. - TAX APPEAL NO. 64 of 2015 With TAX APPEAL NO. 65 of 2015 TO TAX APPEAL NO. 70 of 2015 - Dated:- 28-4-2015 - MR. M.R. SHAH AND MR. S.H.VORA, JJ. FOR THE APPELLANT : MR JP SHAH FOR MR MANISH J SHAH, ADVOCATE JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.00. As common question of law and facts arise in this group of this appeals, and as such they arise out of t .....

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the appellant - assessee has preferred Tax Appeal No. 64 of 2015 with the following proposed substantial questions of law :- (a). Whether on the facts and in the circumstances of the case, the Tribunal was right in law in reversing the well reasoned order of C.I.T. (Appeals) and in sending the matter back to the Assessing Officer when in the earlier years, agricultural income from the same land was accepted by the Department from the lower figure of ₹ 11,47,486/- to the higher figure of & .....

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ferred Tax Appeal No.65 of 2015 with the following proposed substantial questions of law :- (a). Whether on the facts and in the circumstances of the case, the assessee was the owner of the land at Survey Nos.287 and 458? (b). If the reply to the above question is in the affirmative, whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sale of Plot Nos.287 and 485 yielded business profit in the hands of the assessee? 2.02. Feeling aggrieved .....

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l income from the same land was accepted by the Department from the lower figure of ₹ 8,11,167/- to the higher figure of ₹ 14,21,873/- and this year s income was ₹ 7,24,132/- only? (b). Whether on the facts and in the circumstances of the case, the tribunal was right in holding the sale of Plot No.91 yielded business income and not capital gain and thus reversing the well reasoned order of C.I.T. (Appeals)? (c). Whether on the facts and in the circumstances of the case, the tri .....

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ee was the owner of land at Survey No.287? (b). If the reply to the above question is in the affirmative, whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sale of land at Survey No.287 yielded business profit in the hands of the assessee? 2.04. Feeling aggrieved and dissatisfied with the impugned judgement and order passed by the learned tribunal in ITA No.2659/Ahd/2010 for A.Y. 2007-2008, by which the learned tribunal has allowed the s .....

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0,82,809/- to the higher figure of ₹ 14,36,108/- and this year s income was ₹ 9,16,424/- only? (b). Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sale of Plot No.91 yielded business income and not capital gain and thus reversing the well reasoned order of C.I.T. (Appeals)? 2.05. Feeling aggrieved and dissatisfied with the impugned judgement and order passed by the learned tribunal in ITA No.2703/Ahd/2010 for A.Y. 2007-200 .....

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f the assessee? 2.06. Feeling aggrieved and dissatisfied with the impugned judgement and order passed by the learned tribunal in ITA No.238/Ahd/2011 for A.Y. 2007-2008, by which the learned tribunal has allowed the said appeal preferred by the revenue, the appellant - assessee has preferred Tax Appeal No.70 of 2015 with the following proposed substantial questions of law :- (a). Whether on the facts and in the circumstances of the case, the Tribunal was right in law in reversing the well reasone .....

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ll reasoned order of C.I.T. (Appeals)? 3.00. For the sake of convenience, facts of Tax Appeal No. 64 of 2015, arising out of the impugned judgement and order passed by the learned tribunal in ITA No.2657/Ahd/2010 for A.Y. 2007-2008, are narrated. 3.01. That the assessee - Mr.Ramesh C. Prajapati filed return of income for A.Y. 2007-2008 declaring total income at ₹ 19,86,268/-. The case was selected for scrutiny by issuing notice under section 143(2) of the Income Tax Act, 1961 (hereinafter .....

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-. 3.02. That the assessee also declared Long Term Capital Gain on sale of Revenue Survey Nos. 91, 484 and 287 and declared ₹ 68,50,473/- as Long Term Capital Gain. The assessee declared Long Term Capital Gain at Rs.NIL after claiming deduction under section 54EC of the Act. 3.03. That the A.O. did not accept the claim of the assessee with respect to agricultural income as well as Long Term Capital Gain with respect to income from land transactions. Thus, while finalizing the assessment, t .....

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e said appeal and deleted the addition made by the A.O. with respect to the sale of Revenue Survey No.91 treating it as Capital Gain. The learned CIT(A), however, confirmed the addition of ₹ 32,55,053/- made by the A.O. on sale of property bearing Revenue Survey No.287 by treating the income derived from the sale of Revenue Survey No.287 as income from business. 3.05. Feeling aggrieved and dissatisfied with the order passed by the learned CIT(A) both, the revenue as well as the assessee pr .....

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Ahd/2010 in case of assessee - Mr.Hasmukhbhai R. Prajapati and appeals being ITA No.2659/Ahd/2010 and ITA No.2670/Ahd/2010 in case of Assessees - Rajesh D. Prajati and Mr.Raman C. Prajapati, respectively. 3.06. The assessee preferred appeal before the learned tribunal being ITA Nos.238/Ahd/2011. That by the impugned judgement and order, the learned tribunal has quashed and set aside the orders passed by the learned CIT(A) and restored the respective assessment orders and has treated the income f .....

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ion 41(1) of the Act with regard to the amount of ₹ 1,48,25,333 shown by the assessee as advance received against land sale alleged to have been received from one Janpriya Trust against sale of land of Survey no.91, the learned tribunal has remanded the matter to the file of the learned CIT(A) to decide the issue afresh, after considering the submissions of the assessee and after considering the report from the A.O. 3.09. Feeling aggrieved and dissatisfies with the impugned judgement and o .....

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itted that the learned tribunal has materially erred in treating / considering the income from sale of Survey No.91 as business income and not Capital Gain. It is submitted by Mr.Shah, learned advocate appearing on behalf of the respective assessees that Survey No.91 was acquired by the respective assessee by way of Will and therefore, it was Capital in nature. It is submitted that therefore, the income from the sale of the aforesaid property which was acquired by sale ought to have been treated .....

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he has heavily relied upon section 45(2) of the Act as well as decisions of the Division Bench of this Court in the case of Ramjibhai Dahyabhai Versus Commissioner of Income-Tax, reported in (1986) 158 ITR 540 (Gujarat) as well as in the case of Commissioner of Income Tax, Bombay Versus H. Holck Larsen, reported in (1986) 160 ITR 67. 4.02. Mr.J.P. Shah, learned advocate appearing on behalf of the respective assessees - original appellants has further submitted that, as such for 20 years, land b .....

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ly erred in confirming the addition made by the A.O. in the income of the respective assessees treating the income of sale of Revenue Survey No.91 as business income. 4.03. Now, so far as the order passed by the learned CIT(A) as well as the learned tribunal holding that the parcel of land of Revenue Survey No.287 was the property of Partnership Firm named - M/s.Satyanarayan Traders, is concerned, it is vehemently submitted by Mr.J.P. Shah, learned advocate appearing on behalf of the respective .....

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ld as Stock-in-trade of M/s.Satyaranayan Traders. Relying upon the decision of Bombay High Court in the case of Commissioner of Income-Tax Versus J.M. Mehta and Bros., reported in (1995) 214 ITR 716 (Bombay) as well as decision of Madras High Court in the case of Commissioner of Income-Tax, Tamil Nadu-I Versus Dadha and Company, reported in (1983) 142 ITR 792 (Madras), it is vehemently submitted by Mr.Shah, learned advocate appearing on behalf of the respective assessees that both, the learned C .....

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erefore the learned A.O., learned CIT(A) as well as the learned tribunal have materially erred in making addition int eh income received by sale of the aforesaid parcels of land as business income in the hands of the respective assessees. 4.04. Mr.J.P. Shah, learned advocate appearing on behalf of the respective assessees - original appellants has further submitted that the learned tribunal has materially erred in remanding the matter to the A.O. with respect to the agricultural income. It is su .....

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sing the order of the learned CIT(A) on Section 41(1) of the Act and sending the matter back to the learned CIT(A). Making above submissions, it is requested to admit/allow these appeals. 5.00. Heard Mr.J.P. Shah, learned advocate appearing on behalf of the respective assessees - original appellants at length. 6.00. Now, so far as the proposed question No.(a) in Tax Appeal Nos.64, 66, 68 and 70 is concerned, it is required to be noted that the learned tribunal has as such remitted the issue to t .....

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he assessee s contention that he has stated to have earned agriculture income from the crop produced / grown by it but the submission of the assessee of having earned agriculture income was not accepted by A.O. We find that no basis has been spelled out by the A.O. to arrive at the conclusion that out of total income declared by assessee, part of income was business income. We also find that no enquiry was made by the A.O. either by himself or through the Inspector to verify and examine the land .....

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aving agriculture income in view of the agriculture land shown at ₹ 1.25 Crore in the balance sheet. During the course of hearing the ld. A.R. Has asked specific question about the total land holding of the assessee, the type of crops grown and what were the irrigation facilities available to which neither the ld. A.R. or ld. D.R. Could furnish any reply. We are therefore of the view that the details like the land holding under agriculture, nature of irrigation facility on the land, the cr .....

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additional evidence, if any, in support of his contention. In result, this round of Revenue is allowed for statistical purposes. 6.01. In view of the above facts that when now the matter is remitted to the file of learned A.O. to examine the aforesaid issue afresh in accordance with law, we see no reason to interfere with the same. No error has been committed by the learned tribunal in remitting the issue to the file of learned A.O. No substantial question of law arise. Hence Tax Appeal Nos.64, .....

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.O. While remanding the issue to the file of learned CIT(A), the learned tribunal in para 22 has observed as under :- 22. We have heard the rival submissions and perused the material on record. We find that CIT(A) while deciding the issue in favour of the assessee has held that the assessee would have received the balance amount from Janpriya Trust on sale of land and such amount has been offered to tax. Before us, nothing has been placed on record to demonstrate that the said amount was receive .....

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reexamined. We therefore, remit the issue to the file of CIT(A) to decide the issue afresh after considering the submissions of the assessee and thereafter obtaining Remand Report from A.O. Needless to state that CIT(A) shall grant adequate opportunity of hearing to both the parties. Assessee is also directed to promptly submit all the required details and additional evidence that it may be want to rely. Thus, this ground of Revenue is allowed for statistical purposes. We are in complete agreem .....

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ome and not capital gain in respect of Tax Appeal Nos.64, 66, 68 and 70 of 2015 is concerned, the assessee treated the income received on sale of Revenue Survey No.91 as capital gain. It was the case on behalf of the assessee that he along with others acquired the said land by way of Will executed by the original owner - Mr.Maganbhai Ambalal Patel. Therefore, it was the case on behalf of the respective assessee that the land was acquired through Will more than 20 years back and therefore, on its .....

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der consideration. The learned tribunal while confirming the findings recorded by the A.O. that profit from sale of land bearing Survey No.91 as business income, the learned tribunal in para 13 has observed and held as under :- 13. We have heard the rival submissions and perused the material on record. The issue in the present ground is the treatment of treat of tax of the profit earned on sale of land. According to the A.O., the profit to be treated as business income whereas according to the A .....

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, it is seen that the Will is only notarized by Notary and it is not registered nor it was probated. On a query by the Bench as to whether the assessee was related to Shri Manganbhai Patel, it is submitted that Shri Maganbhai Patel was not related to the assessee. It is also a fact that though assessee had submitted that the land was received by him more than 20 years back, but it is also a fact that the aforeasid land was not disclosed I the balancesheet of the assessee after its acquisition. T .....

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the Books of Accounts and had got the same audited, no valid justification has been offered for not showing the land acquired through inheritance from the financial year 1997-98 onwards in the Balancesheet. A.O. in his order has also noted that assessee has got completed various legal formalities like obtaining NA Order from Collector, Vadodara, Development Permission from Municipal Corporation, Zoning Certificate from Vadodara Urban Development Authority getting the lay out plans approved, dev .....

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t No.91 as Business Income . We are in complete agreement with the view taken by the learned tribunal holding the income from sale of land bearing Survey No.91 as business income and not as capital gain as claimed by the assessee. As observed by the learned tribunal, the assessee was not related to said Mr.Maganbhai Patel. Considering the aforesaid facts and circumstances of the case, the decisions of the Division Bench of this Court in the case of Ramjibhai Dahyabhai (supra) and in the case of .....

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emaining Tax Appeals i.e. Tax Appeal Nos.65, 66 and 69 of 2015 with respect to land bearing Revenue Survey Nos.287 and 485 is concerned, at the outset it is required to be noted that the aforesaid parcels of land were held as Stock-in-trade by M/s.Satyanarayan Traders and even the same were also shown in the Balancesheet of M/s.Satyanarayan Traders. It is a fact that the said parcels of land were not recorded / mentioned in the individual Balancesheet of the assessee. It was the case on behalf o .....

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r :- With regard to the land Revenue No.287, the said land was purchased in the year 1999 and the consideration for purchase was made on account of M/s.Satyanarayan Traders where the appellant is a partner. This land was purchased along with other and during the year was sold after being held for a period of 8 years. Land at R.S. No.485 was purchased in the year 1999 and was sold to M/s.Rajshri Developers vide a Development Agreement. The appellant was not the sole owner of the land. It is a wel .....

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he hands of individual members. The reason forwarded by the learned authorized representative was that all the lands were shown in the hands of M/s.Satyanarayan Traders by mistake. M/s.Satyanarayan Traders are in the business of real estate development. The appellant claimed that the plots were not included in the individual Balancesheet by mistake. Why and how such a mistake consistently occurred has not been explained. It is difficult to accept the appellant s contention that the mistake of in .....

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transaction as capital gains does not help the appellant. In fact it was only after recasting of the Balancesheet of M/s.Satyanarayan Traders and the partners, the appellant started to sell the properties, thereby indicating that business stock has been divided into individual ownership and then sold. Hence the Assessing Officer s conclusion that the income derived from the sale of this plot of land is income from business is correct and the addition of ₹ 32,55,053/- is confirmed. 9.01. Th .....

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idual Balancesheet of the assessee was due to the mistake. These submissions have not been found to be acceptable by CIT(A). Before us, nothing has been brought on record to demonstrate that the consideration for the purchase of the land was paid by the assessee and not by M/s.Satyanarayan Traders, the firm. The submission of assessee that the non-recording of the land in the individual Balancesheets was on account of mistake in accounting was also not accepted by CIT(A). Before us the assessee .....

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