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Income Tax Appellate Tribunal, NAGPUR BENCH : : NAGPUR
Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by the Assessee against the order of ld.Principal Commissioner of Income Tax, Nagpur-1 under section 263 of the Income Tax Act, 1961 dated 14.01.2019 emanating from the order under section 143(3) of the Act, 1961 dated 31.03.2017. The grounds of appeal raised by the Assessee are as under :
“1. That the order of the Respondent is without the satisfaction of the twin condition that the assessment order is erroneous and prejudicial to the interest of Revenue.
That the Assessing Officer has passed the order after making proper enquiries and verification of all details in respect to assessee’s claim of deduction/exemption, the order could not be said to be erroneous or was passed without application of mind merely because the same was not an elaborate order. However the order u/s 143(3) dated 31.03.2017 by the AO states that “copy of sale of immovable property purchased and sold etc. All the details are kept on record.”
3. That there is change in view or opinion by the Department which is bad in law and facts.
That the scrutiny was limited scrutiny and with reference to the reasons of the limited scrutiny, to change the opinion is beyond the scope of AO or the Respondent.
That the respondent has erred in re-opening the assessment on the grounds of proper enquiry because the satisfaction of AO is not recorded in the order.
6. Appellant is of the opinion that Original Order u/s 143(3) is correct and requires no change or modification.
That any other ground may please be permitted at the time of hearing of the Appeal.” Brief facts of the case : 2. In this case the assessee had filed return of Income for A.Y.2015-16 on 17/09/2015. The case of the assessee was selected for scrutiny. The Assessing Officer (AO) passed Assessment Order on 31/03/2017 accepting the returned income. The ld.Pr.Commissioner of Income Tax, Nagpur initiated proceedings under section 263 by issuing notice u/s 263 dated 21/11/2017.
2.1 The assessee had entered into an Agreement to Sale and Develop a plot of agricultural land admeasuring 91000 sq.ft approximately with its joint owners Paradkar Brothers on 15/02/2004. As per the impugned Agreement assessee was to develop 20000 sq.ft of the land and hand over the same to Paradkar Brothers plus Rs.50000/-. The Assessee developed the 20000sq ft plot and handed over to Paradkar Brothers. Assessee also paid them Rs.50000/-. As per the impugned agreement after handing over the 20000sqft developed plot Paradkar Brothers handed over remaining plot of land to the assessee. The Assessee converted the land into Non Agriculture land. The Assessee made plots of various sizes. During A.Y.2015-16 assessee sold some plots. Some plots were sold in earlier years. The Assessee had offered the Sale consideration as Capital Gain in the Return of Income for A.Y.2015-16 and claimed benefit of Section 54 purchasing another property. The ld.Pr.CIT mentioned in the Order under section 263 that the Assessing Officer(AO) had not carried out proper inquiries regarding the said Sale of plots. The ld.Pr.CIT, for the reasons discussed in the order, observed that the Sale Consideration received by the Assessee should have been taxed under the head Income from Business and not Capital Gain. Accordingly, the ld.Pr.CIT concluded that the Assessment Order was erroneous and prejudicial to the interest of Revenue hence ld.Pr.CIT set aside the assessment order and directed the Assessing Officer to complete the Assessment de- novo after carrying out necessary enquires.
2.2 Aggrieved by the Order under section 263 assessee has filed present appeal. Submission of the Ld.Authorised Representative (ld.AR) of the Assessee :
Ld.AR submitted that during the scrutiny proceedings the Assessing Officer(AO) had carried out necessary inquiries regarding the issue of sale of land. The AO passed assessment order after considering the submission of the assessee. The Ld.AR submitted that the AO had formed opinion based on the details. Hence the Assessment order is not prejudicial and erroneous. The Ld.AR invited our attention to the submission filed by the assessee during the assessment proceedings which include copy of the Agreement of Sale and Development between Assessee and Paradkar Brothers dated 15/02/2004 with respect to the Agricultural land owned by Paradkar brothers.
3.1 Ld.AR explained that the assessee had entered with the Paradkar brothers, who were joined owners of the Agricultural land admeasuring 0.91 hectares, (page 12 of the paper book filed by the AR) an Agreement for Sale and Development on 15/02/2004. As per the said Agreement for Sale & Development, Clause-2, the assessee paid Rs.50,000/- to Paradkar Brothers and agreed to hand over developed plot admeasuring 20000 sq.ft. The Assessee handed over developed plot of 20000sq.ft to Paradkar Brothers on 11/01/2005. As per the impugned Sale and Development agreement Paradkar Brothers handed over remaining portion of the land to the assessee. The Assessee converted the land into Non-Agricultural Land. Then Assessee made plots of the land. During the A.Y.2015-16, the assessee sold some plots and offered the consideration for taxation as capital gain. The Assessing Officer had verified all these facts. Hence Ld.Pr.CIT has erred in invoking provisions of Section 263. The Ld.Pr.CIT is of the opinion that the said income is business income. This is mere change of opinion.
Submission of Ld.Departmental Representative(ld.DR) : 4. Ld.DR for the Revenue relied on the order of the Pr.CIT. Ld.DR vehemently argued that assessee was doing business of sale of plots.
Findings and Analysis : 5. We have heard both the parties and perused the records.
5.1 On perusal of the Assessment order dated 31.03.2017 it is observed that the Assessing Officer(AO) had not mentioned anything in the assessment order and merely accepted returned income.
5.2 It is an admitted fact that on 15/02/2004 the Assessee entered into an Agreement to Sale and Develop with seven persons referred as Paradkar Brothers for Purchase and Development of Agricultural Land admeasuring 0.91 hectares. It is an admitted fact that as per the impugned Agreement, the assessee developed 20000 sq.ft land and handed over to Paradkar brothers. Assessee also paid Rs.50,000/- to Paradkar Brothers. The Assessee received remaining portion of land. The Assessee converted the land into Non-Agricultural land. Then assessee converted the land into smaller plots of various sizes. During the A.Y.2015-16 admittedly assessee sold some of the plots. Assessee had sold some plots in earlier years but no details available on record.
5.3 When we analyse the entire activities of the assessee to convert the land into Non-Agricultural land then convert into smaller plots, we are of the opinion that this is nothing but an adventure in the nature of trade. The sale of Non-Agricultural plots by converting Agricultural land into Non-Agricultural Land is nothing but business activity. The AO had failed to analyse the impugned Agreement dated 15/02/2004 which is not a Sale Agreement ‘simplicitor’, but it is a Development Agreement. This aspect of “Development” has not been verified or inquired by the AO during the assessment proceedings. An investor who purchases a land with an intention to Sale in future does not enter into such kind of “Development” agreement. It is an admitted fact by the assessee that Assessee developed the land and handed over 20000 sq ft developed plot to Paradkar Brotheres. Paradkar brothers had sold the plots given to them and Assessee has signed as Confirming party in those Sale deeds. All these acts by the assessee clearly explains his intention to do the business of sale of plots by developing plots. The AO has erred in not carrying proper inquiries on this issue. The Assessee may have submitted copy of the impugned agreements but it is a fact that there is nothing on record to suggest that the AO has properly understood those documents .The case laws relied by the Ld.AR are factually distinguishable hence not applicable in the case of the assessee.
5.4 Therefore, for all the reasons discussed above, we agree with the ld.Pr.CIT that the Assessment Order is erroneous and prejudicial to the interest of revenue. Accordingly, we uphold the order under section 263 of the Act. Accordingly, Ground Numbers 1, 2, 3, 5 & 6 are dismissed. Ground No.4 : 5.5 The Assessee has raised the Ground No.4 that the case was selected for limited scrutiny and hence the inquiry was beyond the scope of limited scrutiny. It is observed that the case was selected to verify increase in capital during the year and verify the sale consideration of the property during the year reported in ITR which is less than sale consideration of property reported in AIR. Thus, it is an admitted fact that the case was selected to verify the sale consideration of property. The entire issue raised by the ld.Pr.CIT is related to the sale consideration and its treatment. Therefore, it was well within the ambit of scrutiny. Hence, the ground number 4 is dismissed.
5.6 Ground No.7 is general in nature. No other ground was raised during the hearing. Accordingly, Ground No.7 is dismissed.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open Court on 27th February, 2024.