TMI Blog2015 (12) TMI 1235X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessing Officer. However, he asked the assessee to produce the four brokers on 27/12/2010 for verification. It is a fact that time given by the ld Assessing Officer was not sufficient. However, 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 disallowed the expenses on estimate basis. Therefore, we do not find any reason to confirm the disallowance out of brokerage expenses.- Decided i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held the same exempted income as business income. The rule of res judicata is not applicable in the case of income tax proceedings but the Hon'ble Supreme Court in the case of Radhaswami Satsang Vs. CIT [1991 (11) TMI 2 - SUPREME Court] 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 under the head fixed assets, therefore, the case law referred by the assessee are squarely applicable in the case of assessee. Accordingly, we reverse the order of the ld CIT(A) on this ground. - Decided in favour of assessee. Assessing the agricultural income as income from other sources - Held that:- The assessee regularly had declared the agricultural income not only in the preceding year but subsequent year, which has been accepted by the Assessing Officer. The assessee has filed the reply during the course of assessment proceedings vide letter dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rading 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 Income Tax Act, 1961 (hereinafter referred as the Act). The assessee furnished details required by the assessee during the assessment proceedings and also produced accounts book and vouchers etc. which was test checked by the A.O. The assessed claimed salary expenses of ₹ 19,20,000/- at the rate of 1,60,000/- per month in cash, to various persons for which he had maintained salary sheets. The ld Assessing Officer gave reasonable opportunities of being heard and asked to file the complete details 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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of land, its owners, obtaining land records from government offices etc.. The complete postal address of the employees 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 ground for disallowance of salary payment. The finding of the ld CIT(A) was without any basis. The cash payment of salary did not mean that salary was not genuine. The assessee has taken details of expenses and signature on receipts, which was available with the assessee, thus no adverse inference can be drawn by the lower authorities. There is no evidence that salary expenses claimed by the assessee was not paid and had come back to the assessee. He relied upon the decision of Hon'ble Supreme Court in the case of CIT Vs. Dhanrajgiri Narain Singh Girji 91 ITR 544 wherein it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 2,70,000/- made by the Assessing Officer out of commission expenses on estimate basis. The ld Assessing Officer observed that the assessee had claimed total commission expenses at ₹ 10,20,000/-, in cash, for acquisition of land for the three parties of Kolkata. The Assessing Officer asked the assessee to give details of brokerage payment and to produce relevant documentary evidence and vouchers etc. with regard to brokerage payment. The assessee had furnished list of 21 persons to whom the brokerage was paid. The 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 vouchers relating to the brokerage payment was self made only. The ld Assessing Officer observed that the assessee had not fully proved the brokerage payment and was also not ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erage 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 disallowed the expenses on estimate basis. Therefore, we do not find any reason to confirm the disallowance out of brokerage expenses. Accordingly, this ground of appeal is allowed. 12. The third ground of appeal is against confirming the disallowance of ₹ 5,62,000/- out of various expenses on estimate basis. The ld Assessing Officer observed that the assessee had claimed various expenses under legal fees for registry, travelling expenses, staff welfare expenses, advertisement expenses, telephone 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance @ 30% out of total expenses. In A.Y. 2009-10 the ld Assessing Officer made disallowance of 20% and 10% out of staff welfare and travelling expenses respectively on the ground that payments had been made in cash without supporting vouchers. However, the ld CIT(A) reduced the disallowance to 10% and 6.34% out of staff welfare and 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 reiterated the arguments given by the ld CIT(A) as the payments were made in cash and self made vouchers, which are not verifiable. 16. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee s business is as such that no pakka vouchers can be collected from the recipients of payments. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchased 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 respective municipal limits. The agricultural land is not covered within the definition of capital assets U/s 2(14) of the Act. The assessee filed copy of notification dated 06/01/1994, which proved that only Alwar and Jaipur district are notified for the purpose of taxability of agriculture land situated within 8 km from municipal limits. Thus, it was claimed by the assessee that profit on sale of the agricultural land was not liable to be taxed as business income and further it is not taxable 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 differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al in nature. During the period relevant to assessment years 2007-08 and 2008-09 the assessee has purchased/sold number of immovable properties the details of 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 known that due to the said industrial development the rates of agricultural and other lands in Behror Tehsil have increased manifolds during the last 5-6 years, which are not at all commensurate with any return of agricultural cultivation. Since the assessee himself is a Real Estate Broker of high stature, therefore, he not only knows the hazards and the profits of dealing in land and real estate but he is fully acquainted with the lands belonging to various farmers of the area and their potentialities. Therefore, he has purchased and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) Khan Bahadur Ahmed Alladin Sons Vs. CIT 68 ITR 573 (SC) (c) Janki Ram Bahadur Ram Vs. CIT 57 ITR 21 (SC) (d) 139 ITR 916 (MP). The AR has mainly relied on the submission that these agricultural lands were covered by the provision of Section 2(14) of the IT Act in which capital asset is defined and since all the agriculture lands were sold as such and not as commercial or residential property, the income from such sale is not liable to be taxed as business income and further the capital gains is also not attracted. It has been submitted that in A.Y. 2008-09, only one land purchased from 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. The area in and around Behror, Neemrana and Shahjahanpur on National High Way-8 has been wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es purchased in last year was shown 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 evident that assessee has acquired the immovable property as investment not as stock in trade. Further, whenever he sold any property, it is reinvested in purchase of another property. He has made investment in the property held it with an intention to have capital appreciation. Hence, gain from the sale of agricultural land in the year under consideration cannot be assessed as business income. 2. It may be noted that in A.Y. 07-08, assessee has earned gain of ₹ 83,11,740/- on sale 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 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land in parts (only one land mentioned at S.No. 4) cannot be criteria for holding that assessee s activity is an adventure in the nature of trade. Reliance is placed in case of CIT Vs. Harjit Singh Sangha (2013) 217 Taxman 201(P H) (HC)(Mag.) wherein land purchased by assessee was registered in land revenue records as agricultural land, and it was being used by assessee as such. Later on, it was sold in small plots to different purchaser. No development of land was made by assessee prior to its sale. It was 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 made in the same financial year and the holding period was of 16 days to 152 days only. It is to be noted that in A.Y. 07-08, gain of ₹ 83,11,740/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the revenue records. 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 carried out the same would not become an agricultural land. The decision of Delhi High Court in case of Hindustan Industrial Resources Ltd. Vs. ACIT 335 ITR 77 and of Bombay High Court in case of CIT Vs. Smt. Debbje Aleno 331 ITR 59 on this issue is fully applicable. From the details of land purchased and sold in A.Y. 07-08 (Annexure B), it can be seen that land mentioned at S.No. 2 was purchased from Sh. Dayanand on the basis of agreement which was acquired by RIICO and the compensation was received 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realize the capital appreciation. 4. It may be noted that only because agricultural activities were not carried out or that the person to whom the land was sold has no intention to carry out the agricultural activities on the land sold or that the land is sold within a short period would not mean that the agricultural land held by the assessee is not for investment but for adventure in the nature of trade. In various cases, it has been held that this is not a decisive factor to held that gain from sale of such land is to be assessed as 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 Courts referred above cannot be a basis for holding that gain on sale of agricultural land is taxable as business i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land 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 exempted capital given of ₹ 83,11,740/-, which has been accepted by the Assessing Officer himself as the assessee has drawn attention on page No. 31 to 33 of paper book wherein copy of assessment order for A.Y. 2007-08 enclosed which shows that there is no addition made by the Assessing Officer under this head but during the year under consideration, the ld Assessing Officer held the same exempted income as business income. The rule of res judi cata is not applicable in the case of income tax 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- declared by the assessee, AO assessed the same at ₹ 1,60,000/-. In A.Y. 09-10, agricultural income is assessed at ₹ 1,25,000/-. Thus, when in all earlier years and in subsequent year, agricultural income has been accepted, there is no reason to consider the agricultural income of ₹ 60,400/- declared during the year as income from other sources. In view of above, AO be directed to accept the agricultural income declared by the assessee. 25. At the outset, the ld DR has supported the order of the ld CIT(A) and argued that no evidence of agricultural activities were submitted before the lower authorities, therefore, the ld Assessing Officer rightly assessed the agricultural income under the head income from other sources. 26. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee regularly had declared the agricultural income not only in the preceding year but subsequent year, which has been accepted by the Assessing Officer. The assessee has filed the reply during the course of assessment proceedings vide letter dated 30/12/2010 and copy khasra girdawari vide letter dated 23/12/2010 to prove ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
