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2015 (12) TMI 1235 - ITAT JAIPUR

2015 (12) TMI 1235 - ITAT JAIPUR - TMI - Disallowance of salary payment - Held that:- The assessee was asked to furnish details of employees on 07/12/2010, which was submitted with name, address and salary paid, to the Assessing Officer. He also explained the work done and duties assigned to them. It is undisputed fact that the payment of salary was made in cash. The business of the assessee as such that local people are required to make available the details of land available for sale, owners o .....

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left the job and are not traceable. The time given by the Assessing Officer is very short. The ld CIT(A) had not asked the assessee to produce the remaining employees for verification at the time of appellate proceedings. Therefore, we do not find any reason to confirm the addition to this head - Decided in favour of assessee.

Disallowance of commission expenses on estimate basis - Held that:- The assessee furnished the details of brokerage vide letter dated 17/12/2010 before the Asse .....

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uted fact that payments were made in cash on self made vouchers, the ld Assessing Officer had not brought on record any adverse evidence that brokerage payment is not genuine. He simply disallowed the expenses on estimate basis. Therefore, we do not find any reason to confirm the disallowance out of brokerage expenses.- Decided in favour of assessee.

Disallowance of various expenses on estimate basis - Held that:- The assessee’s business is as such that no pakka vouchers can be collec .....

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e, we consider reasonable disallowance out of travelling expenses, staff welfare expenses, telephone expenses, festival expenses, general expenses and guest house expenses @ 10% out of total expenses claimed. We do not require to be disallowed any expenses out of legal fees for registry, advertisement expenses, printing and stationary expenses, land maping and preparing expenses. Thus we confirm the addition of ₹ 14,000/- out of total disallowances made by the ld CIT(A) at ₹ 5,62,900 .....

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d assets as investment not in stock in trade. The assessee’s case has scrutinized continuously and in past also these additions were made by the Assessing Officer but the Coordinate Bench has set aside the issue to the Assessing Officer. It appears that the Coordinate Bench also not accepted the revenue’s plea. Further in A.Y. 2007-08, the assessee had shown exempted capital given of ₹ 83,11,740/-, which has been accepted by the Assessing Officer himself as the assessee has drawn attention .....

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of consistency is to be followed to settle the repeated issue. The facts and circumstances of the case are identical to A.Y. 2007-08, therefore, we do not find any reason to hold exempted agricultural capital gain as adventure in nature of trade i.e. business income. The book entries are to be examined for deciding the nature of transaction. The assessee had shown these lands under the head fixed assets, therefore, the case law referred by the assessee are squarely applicable in the case of ass .....

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r dated 23/12/2010 to prove that the assessee had carried out agricultural activity on that land. The ld Assessing Officer in assessment year 2006-07, 2007-08 and 2009-10 has been accepted the assessee’s agricultural income. The ld Assessing Officer also had not brought out any evidence to substantiate the finding made by him that the assessee had not carried out any agricultural activity on it. Therefore, we allow the assessee’s ground of appeal and the Assessing Officer is directed to treat th .....

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n facts and in law in confirming disallowance of ₹ 4,20,000/- made by A.O. out of salary payment on estimated basis by holding that the same has been claimed excessive in order to reduce the commission income. 2. The ld Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming disallowance of ₹ 2,70,000/- made by A.O. out of commission expenses on estimated basis. 3. The ld Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming disallo .....

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. in assessing the agricultural income of ₹ 60,400/- as income from other sources. 2. The first ground of the assessee s appeal is against confirming the disallowance of ₹ 4,20,000/- made of by the Assessing Officer out of salary payment. The assessee is a real estate agent trading in land and plot etc. The assessee filed his return on 31/3/2009 declaring income of ₹ 1,08,28,030/- and had shown agricultural income or ₹ 60,400/-. The case was scrutinized U/s 143(3) of the .....

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etails including names and complete postal addresses of all the employees, payment made and the duties assigned to them. The assessee furnished a list of 24 persons to whom he paid salary but had not submitted complete postal addresses and duties assigned to each of them. It is submitted before the Assessing Officer that employees were engaged in field work like identification of land, its owners, obtaining land records from government offices, coordination with the land owners, to get written t .....

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r dated 27/12/2010. The assessee produced six employees before the ld Assessing Officer who had examined them but four persons were not made available for cross examination by the assessee. The ld Assessing Officer further observed that the assessee had done the brokerage work on behalf of only three parties of two groups of Kolkata and had failed to produced number of employees for examination, therefore, he treated the salary payment excessive. The ld Assessing Officer allowed salary expenses .....

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on and verification. This constitutes 40% of the sample of ten persons selected by the Assessing Officer. Considering the payments have been made in cash and the appellant has failed to verify the salary payments in the course of verification by the Assessing Officer made on random basis. He held that the observations made by the Assessing Officer is about 22% of salary payment. Thus, disallowance assessed to be quite reasonable. Accordingly, he confirmed the addition. 4. Now the assessee is app .....

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s were given inasmuch as all the employees belong to nearby villages and in villages, the house number or name of locality generally does not exist. The assessee filed letter dated 27/12/2010 had explained that four out of ten employees who could not be produced for examination are either out of station or have left the job. The assessee was trying to produce them but due to time constraint, he could not produce them before 31/12/2010. Thus, merely non-production of four employees cannot be a gr .....

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Court in the case of CIT Vs. Dhanrajgiri Narain Singh Girji 91 ITR 544 wherein it has been held that it is not open to the department to prescribe what expenditure an assessee should incur and in what circumstances he should incur that expenditure. Every businessman knows his interest best. Further the Hon ble Patna High Court in the case of Jamshedpur Motor Accessories Stores Vs. CIT 95 Taxman 664 has held that a lesser amount then the amount expended cannot be allowed merely because the Asses .....

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). 6. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee was asked to furnish details of employees on 07/12/2010, which was submitted with name, address and salary paid, to the Assessing Officer. He also explained the work done and duties assigned to them. It is undisputed fact that the payment of salary was made in cash. The business of the assessee as such that local people are required to make available the details of land av .....

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claimed by him that they left the job and are not traceable. The time given by the Assessing Officer is very short. The ld CIT(A) had not asked the assessee to produce the remaining employees for verification at the time of appellate proceedings. Therefore, we do not find any reason to confirm the addition to this head. Accordingly, we allow this ground of assessee s appeal. 7. The second ground of the assessee s appeal is against confirming the disallowance of ₹ 2,70,000/- made by the As .....

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assessee was requested by the Assessing Officer to produce four persons for examination for test check basis to whom commission paid. The assessee out of four persons, two persons were produced, statement of both the persons were recorded and remaining two persons could not be produced by the assessee for examination. The Assessing Officer held that the assessee did not maintain or produce any specific details and the basis on which said payment was paid in cash to various brokers. All the vouch .....

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ddition by observing that the assessee paid brokerage of ₹ 10,20,000/- in cash to 21 persons only by self made vouchers bearing the narration being the amount paid to….. (name of person)… for commission against land . The appellant has not maintained or produced specific details of transaction regarding the purchase/sale of land for which claim of commission/brokerage payment has been made. The appellant has also failed to produce all the persons called for examination in the .....

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010. Thus, merely non-production of 2 brokers cannot be a ground for disallowance of commission payment. Therefore, the ld CIT(A) s observation made in the order is uncalled for. Payment in cash does not mean that the expenses were not genuine. In respect of cash payment, the vouchers containing the detail of expenses and signature of the recipient are available. He further relied upon the case law referred for the salary expenses and argued that same are squarely applicable on this payment also .....

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r, the assessee produced two brokers for verification. The details of brokerage have been submitted alongwith letter dated 07/12/2010. The details furnished before the Assessing Officer showed that they are villagers of nearby area who provided the services to make available the land in that area. It is undisputed fact that payments were made in cash on self made vouchers, the ld Assessing Officer had not brought on record any adverse evidence that brokerage payment is not genuine. He simply dis .....

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hone expenses, printing and stationery expenses, land map preparing expenses, festival expenses, general expenses and guest house expenses to the tune of ₹ 18,76,340/-. The assessee was asked to prove the expenses with the help of necessary documents/evidence by supporting vouchers by the Assessing Officer. The assessee produced the vouchers of self made only for all the above expenses and did not produce any documentary evidence or supporting vouchers in respect of all the expenses. The l .....

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ss amount of commission received. It is possible that for some of the items the appellant may not be able to get supporting bills or vouchers but that should normally be a small percentage of the total expenses claimed. It is an admitted fact that no supporting vouchers or any other details were furnished by the appellant in support of its claim of various expenditure. The appellant has been operating as real estate agent, trading in lands and plots etc. in the village of Majra Kath of Tehsil Be .....

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14. Now the assessee is in appeal before us. The ld AR of the assessee has submitted that the assessee vide letter dated 27.12.2010 had explained that the expenses have been incurred during the regular course of business to perform the various works as per details submitted before the Assessing Officer. The assessee had declared N.P. rate @ 60.34% which is very much reasonable. The nature of these expenses is such that pakka bills are not possible and therefore payments were made through vouche .....

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travelling expenses respectively. He further relied on the following case laws:- (i) ACIT Vs. Ganpati Enterprises Ltd. (2013) 142 ITD 118 (Delhi)(Trib.) (ii) CIT Vs. Oracle India (P) Ltd. 199 Taxman 181 (Del) (HC) (Mag.) (iii) Seasons Catering Services (P) Ltd. Vs. DCIT 43 DTR 397 (Del) (Trib) (iv) Arthur & Anderson & Co. Vs. ACIT (2010- TIOL-416-ITAT) Thus, he prayed to reduce the disallowance suitably. 15. At the outset, the ld AR has vehemently supported the order of the ld CIT(A) and .....

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ssessment on 31/12/2010 hurriedly. It is difficult to provide the full particulars of expenses. It is also a fact that non business purposes, the expenditure can be ruled out in absence of third party evidence. The addition confirmed by the ld CIT(A) appears to be higher side. Therefore, in the interest of justice, we consider reasonable disallowance out of travelling expenses, staff welfare expenses, telephone expenses, festival expenses, general expenses and guest house expenses @ 10% out of t .....

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ricultural land as income from business as against agricultural income claimed by the assessee. The ld Assessing Officer observed that the assessee had made transactions of sale of agricultural land worth total ₹ 39,46,950/-, which were purchased for ₹ 19,37,589/- in the assessment year under consideration and the preceding assessment year, resulting in profit of ₹ 20,09,361/-. The ld Assessing Officer gave reasonable opportunity of being heard on this issue. The assessee submi .....

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ld as such and not as commercial or residential property as evident from the sale of agricultural land. He has not made any division of land and had not sold any part of the purchased land. Rather he had sole complete land as described in the land purchased document. He further submitted that the agricultural land sold at village Bardod, Tehsil Behror, village Belni Tehsil Behror, village Shahajahanpur Tehisl Behror and village Ghasipura Tehsil Shahpura, which is situated more than 8 km from the .....

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under the head capital gain. As per revenue record, the land still had shown as agricultural land. After considering the assessee s reply, the ld Assessing Officer held that the assessee had purchased small pieces of land and sole them after a very short holding period of 39 days to 310 days during the year under consideration. Further the land purchased from Smt. Nirmal Rani on 17/11/2007 for ₹ 2,76,952 was sold in parts to three different parties namely (i) Mahipal Singh, (ii) Naresh De .....

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,11,740/-. All these purchases and sale were made in the same financial year and the holding period was of 16 days to 152 days only. The details of purchase and sale of agricultural land during the financial year 2006-07 relevant to assessment year 2007-08 were enclosed with the assessment order as Annexure-B by the A.O. He further held that from the details given in Annexure-A and Annexure-B it can be seen that the assessee has been selling the land in very small pieces and measurements in most .....

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e of land in revenue records is agricultural is not conclusive. Simply because the land is entered into revenue record would not mean that it is being used for the purpose of agriculture, for which he relied on the decision in the case of State of U.P. Vs. Nand Kumar Aggarwal, AIR 1998 S.C. 473, 476. From the details of land purchased and sold during the F.Y. 2006- 07 (Annexure-B), it can be seen that the land mentioned at sr. No. (2) was purchased from Shri Dayanand, Behror on the basis of agre .....

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which were enclosed as Annexure-C and Annexure-D, which itself shows that the assessee has been doing these transactions as business on regular basis. The assessee himself is a Real Estate Agent for the last so many years and earning lot of brokerage income on account of purchase of agricultural land from local farmers, by industrial houses, in view of the well known on-going industrial development in Behror, Neemrana and Shahjanpur on NH-8 in Behror Tehsil of Alwar district. It is also well kno .....

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ties. Therefore, he has purchased and sold the said lands with sole motive of earning profit and not for doing any agricultural operations. If a transaction is related to the business which is normally carried on by the assessee, though not directly a part of it, an intention to launch upon an advernture in the nature oftrade may readily be inferred [Khan Bahadur Ahmed Alladin & Sons Vs. CIT (1968) 68 ITR 573, 578 (SC), Janki Ram Bahadur Ram Vs. CIT (1965) 57 ITR 21 (SC). He also placed reli .....

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rving as under:- 6.3 I have considered the assessment order as well as submissions made by the A.R.. I find that the appellant is engaged in the business of purchase and sale of plot and land and has also derived commission income as real estate agent during the year. The A.O. has made a detailed discussion in para 2.3 of the assessment order and has concluded that the profit of ₹ 20,09,361/- earned on purchase and sale of agricultural land is in the nature of business income for the follo .....

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icultural operations. (iv) The appellant himself has not done agricultural operations on these lands and the period of holding has been small. The mere fact that the nature of land in revenue record is agricultural would not mean that it was being used for the purpose of agriculture. (v) the A.O. has relied upon decision cited at (a) State of U.P. Vs. Nand Kumar Agarwal, AIR 1998 (SC) 473, 476, (b) Khan Bahadur Ahmed Alladin & Sons Vs. CIT 68 ITR 573 (SC) (c) Janki Ram Bahadur Ram Vs. CIT 57 .....

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Nirmal Rani held for 1 to 2 months, was sold in part to three persons. Other four lands were sold without making any division. I find that the appellant has been purchasing and selling land on a regular basis from year to year and the intention of purchase of such agriculture land has been to earn profit and not to hold the agriculture land as investment. The appellant himself is a real estate broker and the so called agricultural land has not been used by him for the purpose of agriculture. Th .....

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ch in the case of Ratanshi Mulji Patel, Navi Mumbai Vs. Department of Income Tax in ITA No. 5499/Mum/2011 for A.Y. 2008-09 in which it has been observed as under:- 5.5 The real use of land is very relevant and material for deciding the true intention of the assessee in acquiring the land and selling the same. To apply the exception of capital; asset as per section 2(14), the charter of land being agriculture has to be decided with reference to the intention and purpose of acquiring the land. Onc .....

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8377; 20,09,361/- earned by the assessee on purchase and sale of agricultural land as income from business. Accordingly, the addition of ₹ 20,09,361/- is confirmed and this ground is dismissed. 19. Now the assessee is in appeal before us. The ld AR of the assessee has submitted as under:- 1. Whether an asset is held as an investment or as stock in trade is a matter of intention of the buyer at the time of purchase of the asset. This intention is to be gathered from the entries in the books .....

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as Fixed Asset as on 31.03.2006. In F.Y. 06-07, i.e. A.Y. 07-08, assessee purchased some more properties. Out of the properties purchased during the year and in earlier year, some of the properties were sold and the remaining properties were shown under the heading Fixed Asset as on 31.03.2007. Similarly in F.Y. 07-08, i.e. A.Y. 08-09, some more properties were purchased, some are sold and the remaining properties were shown under the heading Fixed Asset as on 31.03.2008. From the same, it is e .....

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ale of agricultural land. The gain was claimed as not liable to as the agricultural land sold was not a capital asset u/s 2(14) of the IT Act. In course of assessment proceedings, assessee vide letter dt. 09.12.2009 provided the details of profit on sale of agricultural land and claimed that the same is not chargeable to tax. The AO after considering the reply of the assessee accepted the claim in assessment framed u/s 143(3) dt. 30.12.2009. Thus, when in A.Y. 07-08, AO himself accepted that the .....

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ies in holding that the assessee s activity of purchase & sale of agricultural land is an adventure in the nature of trade & therefore the gain is to be assessed as business income is incorrect as explained herein under:- Observation of AO/CIT(A) Assessee s Explanation From the details of purchase and sale of agricultural land during the year under consideration[Refer Annexure A of assessment order], it can be seen that assessee has purchased small pieces of land and sold them after a ve .....

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to two months only. But would this lead to a conclusive inference that at the time of investment in land, the intention of the assessee was to trade in land? The profit motive under lies any investment and cannot be taken to be the sole criteria for deciding whether the gains made from short term realization of investments were business in nature. At best, the sale of land within a period of a year can be treated as short term capital gain in assessee s hands. Further, selling the land in parts .....

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as held that assessee s activity could not be termed as an adventure in the nature of trade and gain/profit arising from sale could not be taxed as business income. The assessee is regularly doing the transaction of purchase and sale of agricultural land, year after year. In A.Y. 07-08, assessee purchased 4 pieces of agricultural land and sold the same in parts to different persons earning profit of ₹ 83,11,740/- [Refer Annexure B of the assessment order]. All the purchase and sale were ma .....

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t and not an adventure in the nature of trade. From the details given in Annexure A and B, it can be seen that assessee is selling the land in very small pieces and measurement in most of the sale deeds is also given in square yards. The purchasers of these pieces of land are mostly of posh colonies of Delhi, Mumbai, Chennai, Pune etc. who have purchased these pieces of lands for high prices for commercial purpose only and not for doing any agricultural operations. From the details given in Anne .....

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n revenue records, not under conversion proceedings, not put to non-agricultural use, not situated in developed area and not falling in any municipality but falling in a village was agricultural land not liable to capital gain tax on sale, the fact that the land was purchased by a developer cannot be a determining factor by itself to say that the land was converted into use for non-agricultural purposes. The assessee has not done any agricultural operations on these lands as the period of holdin .....

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ds. The condition of user of land for agriculture purpose is for claiming deduction u/s 54B and not for determining whether it is a capital asset or not u/s 2(14). Therefore, once a land is classified in the revenue records as an agricultural land and it is situated beyond 8 kms of the municipal limit, it would remain an agricultural land even if no agricultural activities is performed on the said land. Conversely, if on an industrial/commercial/residential land, agricultural activities are carr .....

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d by Sh. Dayanand who transferred this amount to assessee in view of the said agreement. The nature of this transaction clearly shows that this purchase and sale was not at all agricultural in nature. This observation is irrelevant in as much in A.Y. 07-08, the AO has accepted that gain on sale of the land is exempt being not a capital asset u/s 2(14). In A.Y. s 07-08 and 08-09, assessee has purchased/sold number of immovable properties, the details of which are enclosed in Annexure C and D whic .....

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; 22.12 lacs as on 31.03.2006 to 118.20 lacs as on 31.03.2007 and to ₹ 318.09 lacs as on 31.03.08. Thus, whatever property is sold, the same is again reinvested in purchase of the property and shown as fixed assets. Therefore, it cannot be inferred that assessee is doing the business of properties on regular basis. The assessee himself is a real estate agent for last so many years and earning lot of brokerage income on account of purchase of agricultural land from local farmers by industri .....

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ngaged in the business of property dealing in respect of the investment in properties made by him. Even a real estate dealer can have two portfolio of the properties one as a business asset and another as investment. Further, because of industrial development, rates of agricultural land have increased disproportionate to the return from agricultural cultivation would not mean that purchase or sale of the land is with a motive of earning profit and not to realize the capital appreciation. 4. It m .....

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business income. He relied on the following case laws: (i) Hindustan Industrial Resources Ltd. Vs ACIT [2011] 335 ITR 77 (Delhi) (HC) (ii) CIT v Smt. DEBBJE ALENO [2011] 331 ITR 59 (Bom) (iii) Smt. Supriya Kanwar Vs. ITO (2014) 149 ITD 1 (Jodhpur) (Trib.) (TM) 5. CIT(A) has relied on the decision of ITAT Mumbai Bench in case of Ratanshi Mulji Patel Vs. Department of Income Tax in ITA No. 5499/Mum/2011 for A.Y. 08-09 dt. 18.07.2012. However, this decision considering the decision of two High Cou .....

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e agricultural land as an investment in A.Y. 07-08 and therefore there is no reason to consider the same as business asset in A.Y. 08-09. In view of above, the AO be directed to delete the addition of ₹ 20,09,361/- on account of profit on sale of agricultural land made by him as business income. 20. At the outset, the ld DR has supported the order of the lower authorities and argued that the assessee is doing systematic business of purchasing and selling of the agricultural land, which was .....

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assessee entered into a series of transactions of purchase and sale of lands, which was held by the Hon'ble High Court as organized business activity and the assessee was carrying on business or adventure in nature of trade. He further relied on decision in the case of Smt. Indramani Bai Vs. Addl.CIT (1993) 200 ITR 594 (SC) wherein it has been held by the Hon'ble Supreme Court that a piece of land purchased and sold into four plots to individuals held adventure in nature of trade. There .....

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nd as business income. All the purchases and sales of the agricultural land beyond 8 km from the municipal area had been shown in the fixed assets as investment not in stock in trade. The assessee s case has scrutinized continuously and in past also these additions were made by the Assessing Officer but the Coordinate Bench has set aside the issue to the Assessing Officer. It appears that the Coordinate Bench also not accepted the revenue s plea. Further in A.Y. 2007-08, the assessee had shown e .....

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ax proceedings but the Hon'ble Supreme Court in the case of Radhaswami Satsang Vs. CIT 193 ITR 321 has held that rule of consistency is to be followed to settle the repeated issue. The facts and circumstances of the case are identical to A.Y. 2007-08, therefore, we do not find any reason to hold exempted agricultural capital gain as adventure in nature of trade i.e. business income. The book entries are to be examined for deciding the nature of transaction. The assessee had shown these lands .....

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e assessee had declared agricultural income of ₹ 60,400/- and required to furnish evidences in support of this claim. It was submitted by the assessee before the Assessing Officer that he had about 12 bighas of agricultural land, but no documentary evidence of agricultural income were with him. Therefore, the ld Assessing Officer assessed this income as income from other sources and taxed accordingly. 23. Being aggrieved by the order of the Assessing Officer, the assessee carried the matte .....

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ound of appellant is dismissed. 24. Now the assessee is in appeal before us. The ld AR of the assessee has submitted that the assessee vide letter dated 30.12.2010 explained that he is having about 12.50 bigha of agricultural land on which he has declared agricultural income of ₹ 60,400/- and vide letter dated 23.12.2010, he filed Khasra Girdawari to prove that agricultural activities were carried on this land. Assessee has declared agricultural income of ₹ 1,24,800/- in A.Y. 06-07 w .....

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