Ita/17/2013 Of Commissioner Of Income Tax-Ii, Amritsar v. M/S Ranjit Rattan Mehra Huf

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.17 of 2013(0&M)Date of decision: 25.08.2015 The Commissioner of Income Tax II, Amritsar .....- Appe M/s Ranjit Rattan Mehra, HUF ....mesponden CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTALHON’ BLE MR. JUSTICE RAMENDRA JAIN 1. Whether Reporters of local papers may be allowed to see the judgment?2. To be referred to the Reporters or not?3. Whether the judgment should be reported 1n the Digest? Present: Mr. Denesh Goyal, Advocate for the appellant. Mr. S.K.Mukhi, Advocate for the respondent-HUF. Ramendra Jain,J. 1].This appeal has been filed by the revenue under Section 260Aof the Income Tax Act, 1961 (in short, “the Act’) against the order dated18.7.2012, Annexure-A.3 passed by the Income Tax Appellate Tribunal,Amritsar Bench, Amritsar in ITA No.442(Asr) of 2011 for the assessmentyear 2008-09, claiming following substantial questions of law:- 1) Whether the Hon'ble ITAT has applied legal principlescorrectly by considering inadmissible evidence and not considering admissible and relevant evidence? 11) Whether on the facts and 1n law the Hon'ble, ITAT was rightin not adjudicating the issue regarding assessment of the profitfrom the sale of land treating as adventure 1n the nature of tradeand assessable as business income under sections 2(13) and 45(2) of the Income Tax Act, 1961? 111) Whether on the facts and in the circumstances of the casethe, Hon'ble ITAT was right in deleting the addition of |440,000/- made by the Assessing Officer as income from|undisclosed sources instead of agricultural income claimed bythe assessee since no agricultural activities were carried out bythe assessee?” ? A few facts relevant for the decision of the controversy,involved as narrated in the appeal may be noticed. The assessee filed itsreturn of income on 31.3.2009 as HUF showing an income otf|3,80,179/-and agricultural income of|VC5,27,08,750/-, which was processed underSection 143(1) of the Act on 24.3.2010. Assessment under Section 143(3) ofthe Act was made vide order dated 31.12.2010 and income was determinedATLv4,82,32,179/-. During the course of assessment proceedings, 1t wasnoticed that the assessee HUF had sold agricultural land measuring |5kanals 18 marlas situated at Village Fazilpur-Jharsa, Gurgaon for —=5,26,68,750/- on 24.1.2008 and the sale proceeds were clubbed intoagricultural income declared by the assessee. The assessee had also shownzy40,000/- income from the sale of agricultural products. Information wassought from the District Town Planner (Planning) Gurgaon regarding ArrowFly distance of Village Fazilpur Jharsa from the municipal limits of Gurgaonas on 24.1.2008 1.e. on the date of sale of land and whether the said village had been covered under any development plan. In reply, it was informed ITA No.17 of 2013 (O&M) had been covered under any development plan. In reply, it was informed ITA No.17 of 2013 (O&M) that the Arrow fly distance and motorable distance from the outer limit ofGurgaon was 3.28 km and 5 km respectively. It was also informed that theagricultural land in question fell in Sector 72 of Gurgaon. Consequently,the Assessing Officer treated the sale of agricultural land as business incomeand after allowing the benefit of cost price and stamp duty paid, made anaddition of v4,78,02,000/-. With regard to agricultural income of=40,000/-, the respondent was required to explain the nature of theagricultural product being sold. The assessee replied that it was growing!SAVSON(mustard)It also stated that the agricultural produce was sold to|M/s Sat Pal Bhagwan Dass and produced J Forms in support thereof. Onenquiry, no such firm was found in existence. The Assessing Officer treatedthe income of|zy40,000/- as undisclosed income. Aggrieved by the order,the assessee filed appeal before the Commissioner of Income Tax (Appeals)[CIT(A)] During the proceedings, the assessee furnished additionalevidence which was admitted by the CIT(A). Vide order dated 25.5.2011,Annexure A.2, the CIT(A) accepted the version of the assessee by treatingthe sale of agricultural land in accordance with the provisions of section 2(14)a11)(a)/(b) of the Act. The alternative claim of the assessee underSection 54F of the Act was also accepted as the assessee had madeinvestment of =a7.18 crores within the short period of six months byacquiring a residential property at Delhi. Not satisfied with the order, thedepartment filed appeal before the Tribunal. Vide order dated 18.7.2012,Annexure A.3, the Tribunal dismissed the appeal. Hence the instant appealby the revenue, 3]We have heard learned counsel for the parties. ITA No.17 of 2013 (O&M) 4Learned counsel for the appellant-revenue submitted that theimpugned order passed by the Tribunal confirming the findings recorded bythe CIT(A) 1s based on surmises and conjectures. There was sufficientevidence on the record that no agricultural activity was even done for thelast two-three years on the land sold by the respondent assessee. Thus, thefinding of the Assessing Officer that income from sale of agriculturalproduce was not agricultural income in the hands of the respondentassessee, was not liable to be set aside when the assessee had failed tolegally prove Form J qua sale of agricultural produce on the record. Further,the land sold by the assessee had lost its agricultural character beingsituated within the radius of 8 kms from Municipal Committee, Gurgaonand thus, the CIT(A) as well as the Tribunal had wrongly set aside theassessment order dated 31.12.2010. 4]On the other hand, learned counsel for the respondent supported the impugned order. 6]Undisputedly, the respondent-assessee HUF had purchasedland measuring 49 kanals 10 marlas on 25.11.2003 and had sold some partof it in the year 2008 for a sum ofLT5,26,68,/750/. The respondent claimethe said sale consideration to be its agricultural income in its return ofincome for the assessment year in question. The Assessing Officer videorder dated 31.12.2010 assessed the same as its business income inter aliaon the ground that no agricultural activity was being done on the land by therespondent prior to its sale; the land had lost its agricultural character beingsituated within the radius of 8 kms from the Municipal committee, Gurgaon;the firm to whom the respondent had sold the agricultural produce, on ITA No.17 of 2013 (O&M) 5 supported the impugned order. 6]Undisputedly, the respondent-assessee HUF had purchasedland measuring 49 kanals 10 marlas on 25.11.2003 and had sold some partof it in the year 2008 for a sum ofLT5,26,68,/750/. The respondent claimethe said sale consideration to be its agricultural income in its return ofincome for the assessment year in question. The Assessing Officer videorder dated 31.12.2010 assessed the same as its business income inter aliaon the ground that no agricultural activity was being done on the land by therespondent prior to its sale; the land had lost its agricultural character beingsituated within the radius of 8 kms from the Municipal committee, Gurgaon;the firm to whom the respondent had sold the agricultural produce, on ITA No.17 of 2013 (O&M) 5 enquiry, was found to be not in existence; the respondent could not legallyprove Form J qua sale of agricultural produce with the said firm and theassessee had also entered into sale transaction in the subsequent assessmentyear 2009-10 in the immovable property amounting to_a4,44 .40,469/- anthus the land was purchased by the respondent with the motive to earn profitafter its sale. On appeal by the assessee, the CIT(A) reversed the findingsrecorded by the Assessing Officer which were upheld by the Tribunal. Onconsideration of the entire evidence and other material on record, theTribunal upheld the finding recorded by the CIT(A) that under theprovisions of section 2(14)(111)(a)/(b), the assessee's land could be held asagricultural land situated beyond 8 kms outside the Gurgaon municipallimits. They had relied upon certificate bearing No.2152 dated 8.3.2011issued by the Senior Town Planner, Gurgaon confirming that the land of theassessee was situated beyond 8 kms. from the Gurgaon MunicipalCommittee limits at the time of execution of sale deed on 24/25.1. 2008 as iwas converted into Municipal Corporation in July 2008. This certificate wasbased on the actual measurement taken from the land holdings of theassessee to the limits of the Municipal Corporation, Gurgaon. The findingregarding carrying on of agricultural activity was also rightly reversed as theAssessing Officer had based its conclusion on the basis of report ofDecember 2010 of the Inspector in respect of agricultural activity prior tothe sale in January 2008. It was also recorded that the Assessing Officer wasnot justified in rejecting the assessee's alternative claim of exemption undersection S4E of the Act as 1t had made investment worth L1T18$ crores morthan the sale consideration within a short period of six months by acquiring a residential property at New Delhi. The relevant findings recorded by theTribunal read thus:- a residential property at New Delhi. The relevant findings recorded by theTribunal read thus:- “OQ. Therefore, 1n the facts and circumstances of the case anvarious decisions relied upon by the assessee before the learnedCIT(A) and before us, we concur with the views of the learnedCIT(A) that the AO is not justified 1n treating the assessee'ssolitary transaction of sale of part of its land holdings on ‘as it 1sand where it 1s’ basis without recording it as its stock 1n trade asassessee's business income by applying provisions of section 45(2) of the Act and without establishing that the assessee 1sactually engaged in making frequent dealings in real estatebusiness during the previous year relevant to the assessmentyear under consideration. The assessee had rather been able tosubstantiate that as per latest certificate bearing No.2152 dated8.3.2011 of the Senior Town Planner, Gurgaon, the assessee'sland is situated beyond 8 kms from the Gurgaon MunicipalCommittee limitation prevalent at the time of its sale executedon 24/25.1.2008 much before its conversion into Municipalcorporation in July 2008 and even the Urban DevelopmentPlans relied upon by the department speak about the facts ofpost sale 1.e. the land being covered as open space area otherthan commercial sites, residential site or park site by the LandDevelopment authorities. The learned CIT(A) had perused theassessment records and it was found that the AQ had notprovided copy of information called for under section 133(6)such as reports of Jehsildar and District Town Planner,Gurgaon, dated 15.10.2010 and 22.12.2010 respectively. TheAO has no where rebutted or contradicted assessee's argumentstogether with evidences, including the additional evidence butrepeated the facts as mentioned in the assessment order,Therefore, we find no error in the order of the learned CIT(A)who has held that under the provisions of section 2(14)(111)(a)/(b), the assessee's land can be held as agricultural land situated beyond 8 kms outside the Gurgaon Municipal limits and thatthe area population of residents of the village Fazilpur Jharsabeing below 10000, the assessee's asset 1s outside the purviewof capital asset. The AO 1s not justified in rejecting theassessee's alternative claim of exemption under section 54F asit has made investment worth =a718 crores more than the saleconsideration within a short period of six months by acquiring aresidential property at New Delhi. Therefore, the AO was notjustified in making addition of <a4,78,02,000/- treatingassessee's agricultural income as business income. The samehas rightly been deleted by learned CIT(A). 10. As regards treatment of agricultural income of <40,000/- asundisclosed income, the assessee had furnished a copy ofGirdawri pertaining to the earlier financial years 2005-06 and2006-07 that crop of sarson was grown and cultivated in theassessee's land holdings and out of the said sarson crops, somecrop was retained to be used as sarson seeds in the next years.Ex Sarpanch of Gram Panchayat of Village Fazilpur Jharsa,Form J No.IIJ dated 15.3.2008 duly verified by Shri JasmeetSingh on 13.12.2010. As per these documentary evidences, theassessee had discharged its onus. These evidences cannot bebrushed aside by the AO. The assessee had been using theneighbourer's tube well for water purposes. The statement oforiginal seller for development of land does not hold anysignificant and evidentiary value against the assessee,Therefore, as per copy of Girdawri and certificate issued by theSarpanch, the AO was not justified in rejecting assessee'scontention with regard to the said agricultural income. In viewof the above discussions, we find no infirmity in the order ofthe learned CIT(A) who has rightly deleted the addition somade by the AO. Thus, grounds No.1 and 2 of the revenue aredismissed.’ Learned counsel for the appellant has not been able to show Learned counsel for the appellant has not been able to show any illegality or perversity in the approach adopted by the CIT(A) as well asthe Tribunal warranting interference by this Court. Consequently, nosubstantial question of law arises in this appeal and the same is herebydismissed. 25 S$ 201yogesh/gs (Ajay Kumar Mittal)Judge| (Ramendra Jain)Judge