SHRI KRISHNA MOHAN CHOURSIYA, RAJGARH vs. ITO, RAJGARH

ITA No.853 of 2017 1 Krishna Mohan Chourasia

आयकर अपील�य अ�धकरण, इंदौर �यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE

BEFORE HON’BLE RAJPAL YADAV, VICE PRESIDENT AND SHRI MANISH BORAD, ACCOUNTANT MEMBER VIRTUAL HEARING

ITA No.853/Ind/2017 Assessment Year: 2014-15

Shri Krishna Mohan Choursiya Rajgarh PAN:AEMPC3634G : Appellant V/s ITO Rajgarh : Respondent Appellant by S/Shri S.N. Agrawal & Bhavesh Agrawal, CAs Revenue by Shri Harshit Bari, Sr. DR Date of Hearing 06.08.2021 Date of Pronouncement 30.09.2021

O R D E R PER MANISH BORAD, A.M The above captioned appeal filed at the instance of the

Assessee for Assessment Year 2014-15 is directed against the

ITA No.853 of 2017 2 Krishna Mohan Chourasia

order of Ld. Commissioner of Income Tax(Appeals) [in short ‘Ld.

CIT(A)’], Ujjain dated 01.09.2017 which is arising out of the order

u/s 143(3) of the Income Tax Act 1961(In short the ‘Act’) dated

28.12.2016 framed by ITO Rajgarh. The Assessee has raised the

following revised grounds of appeal in ITANo.853/Ind/2017:

“REVISED GROUNDS OF APPEAL

ITA No.853 of 2017 3 Krishna Mohan Chourasia

3,42,358/ - as made to the total income of the appellant on account of long-term capital gain earned on the compulsory acquisition of part of tile house without properly appreciating the facts of the case and submissions made before him. 6.That on the facts and in tile circumstances of the case and in law, the Ld CIT(A) erred in maintaining the addition of Rs. 12,86,090/- as made to the total income of the appellant by treating it as unexplained credit under section 68 of the Income-Tax Act, 1961 without properly appreciating the facts of the case and submission made before him even when the said agricultural land was purchased in tile previous year 2012-13 relevant to the Assessment Year 2013-14. 7. That on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in maintaining the addition of Rs. 4,12,148/- as made to the total income of the appellant on account of estimation of net profit @ 8% without properly appreciating the facts of the case and submissions made before him.” Ground Nos.1 to 3

finding of Ld. CIT(A) confirming the addition of Rs.88,78,365/-

made by the Ld. Assessing Officer on account of long-term

capital gain on sale of land. Brief facts as culled out from the

orders of Revenue Authorities are that the Assessing Officer

noted that the assessee sold land for the consideration of

Rs.91 lacs on 02.5.2013. The Assessing Officer treated the

land as capital asset as per sec. 2(14) of the I.T. Act but the

assessee contended that the land is agricultural, therefore, not

chargeable as capital gain.

ITA No.853 of 2017 4 Krishna Mohan Chourasia

Assessing Officer before the ld. CIT(A) who having gone through

the facts/circumstances, material and submissions confirmed

the addition. The ld. CIT(A) noted that the land is situated at a

distance of 1.5 km from the bus stand, Kurawar Gram

Panchayat, therefore, the land is a capital asset. Ld. CIT(A)

further noted from the perusal of sale deed that the sold land was

diverted land for the purpose other than agricultural, therefore,

the land is capital asset and thus, the distance from municipality

or gram panchayat had no bearing. The ld. CIT(A) also noted that

the Assessing Officer recorded the statement of the assessee

during the course of assessment proceedings wherein in reply to

question no.2 and 15, the assessee admitted that the land has

been transferred for the purpose of developing residential plots.

Still aggrieved, the assessee is in appeal before this Tribunal.

made before Revenue Authorities, submitted that the capital gain

accruing to the assessee till the date of diversion of land is

exempt from tax as the land in question was not a capital asset

ITA No.853 of 2017 5 Krishna Mohan Chourasia

as per the provision of section 2(14)(iii) of the Act till the date of

its diversion. Thereafter, capital gain computed considering the

fair market value of land on the date of diversion of

Rs.68,90,415/- comes to NIL and as such, no capital gain is

chargeable to tax in the hands of the assessee during the AY

2014-15 in respect of sale of land in question.

Authorities.

perused material available on record. We find that the assessee

purchased agricultural land situated at Survey no. 83, Village

Lasudalya Ramnath, Halka no. 58, Village Kurawar,

Narsinghgarh, Rajgarh admeasuring 2.529 hectares during the

FY 1978-79. The assessee also purchased agricultural land

situated at Survey no. 82/6, Village Lasudalya Ramnath, Halka

no. 58, Village Kurawar, Narsinghgarh, Rajgarh admeasuring

0.772 hectares during the FY 1988-89. Out of the agricultural

land situated at Survey no. 83 admeasuring 2.529 hectares,

agricultural land admeasuring 2.312 hectares was diverted on

ITA No.853 of 2017 6 Krishna Mohan Chourasia

25.11.2010 and out of the diverted land, land admeasuring 1.147

hectares was sold during the year. Similarly, agricultural land

situated at Survey no. 82/6 admeasuring 0.772 hectares was

diverted on 25.11.2010 and out of the diverted land, land

admeasuring 0.368 hectares was sold during the year. Thus, the

assessee sold 1.515 hectares (1.147 hectares + 0.368 hectares) of

diverted land during the year for a consideration of

Rs.91,00,000/-. The assessee filed the following details:

S. No. Details of the Documents enclosed Page No 1. Copy of the letter as received from Gram Panchayat of Lasudalya Ramnath with reference to the distance of land as sold from the office of gram panchayat and population of the said place where the said land was situated 1.1 Distance of land from Panchayat office of Gram 2.5 Kms 49 Panchayat Lasudalya Ramnath 1.2 Population of Gram Lasudalya Ramnath in 2011 3838 49 was 2. Copy of Google Map reflecting distance from 4 Kms 50 Kurawar to Lasudalya Ramnath 3. Detail of the population of Village Lasudalya 4115 51 Ramnath as per last census from the date of sale

From the perusal of the above, we find that agricultural lands

purchased during the FYs 1978-79 and 1988-89 were rural

agricultural lands and were not capital assets as per section

2(14)(iii) of the Act as all these documentary evidences filed by

the assessee and contents appearing therein have not been found

ITA No.853 of 2017 7 Krishna Mohan Chourasia

to be incorrect by the Revenue Authorities at any stage. The

Revenue Authorities made/confirmed the addition on account of

long-term capital gain on sale of land merely on the basis of sale

deed wherein it was mentioned that the sold land was diverted

land and therefore, the sold land, being non-agricultural land, fell

under the definition of capital asset u/s 2(14) of the IT Act, 1961.

But, the Revenue Authorities failed to note that the assessee

never disputed the fact that the land sold by the assessee was a

diverted land. The only contention of the assessee was that the

agricultural land which was initially purchased by the assessee

was a rural agricultural land till the date of diversion i.e. till

25.11.2010 and as such, capital gain till the date of diversion

was not liable to be taxed. Therefore, the only issue which

requires consideration now is whether the land initially

purchased by the assessee was a rural agricultural land and if it

was so, how much of the amount of capital gain shall be treated

as exempt on that count. We find that the Assessing Officer

observed that the land sold by the assessee was situated at a

distance of 1.5 km (approx.) from the bus stand of kurawar gram

panchayat having population of more than 10,000. Thus, the

Assessing Officer was of the view that the land in question was

ITA No.853 of 2017 8 Krishna Mohan Chourasia

already a capital asset and there would be no impact of distance

of land and accordingly, provisions of section 2(14)(iii) of the Act

shall not be applicable to the facts of the present case. On the

other hand, the Ld. Counsel for the assessee categorically

emphasized that section 2(14)(iii) of the Act refers to inclusion as

capital assets of agricultural land situated in India within the

jurisdiction of a municipality (whether known as a municipality,

municipal corporation, notified area committee, town area

committee, town committee, or by any other name) or a

cantonment board and which has a population of not less than

ten thousand. Ld. Counsel for the assessee re-iterated that land

in question was situated within the jurisdiction of a panchayat

and not within the jurisdiction of a municipality and that

panchayat is to be understood as distinct and different from

municipality. For ready reference, the provision of section

2(14)(iii) of the Act are reproduced hereunder: -

2……….. …………. (14) "capital asset" means— ………… ………… but does not include— ………… ………… (iii) agricultural land in India, not being land situate—

ITA No.853 of 2017 9 Krishna Mohan Chourasia

(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand; or (b) in any area within the distance, measured aerially,— (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh. Explanation.—For the purposes of this sub-clause, "population" means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;

On perusal of records filed before us, we find that the land in

question was situated at a distance of 2.5 kms from the

panchayat office of Village Lasudalya Ramnath which is a gram

panchayat having a population of 4,115 as per the census of

2011. Further, distance of Village Kurawar from Village

Lasudalya Ramnath was 4 kms which is also a gram panchayat

and both Village Lasudalya Ramnath and Village Kurawar are

gram panchayats and these villages are neither municipalities

nor cantonment boards. Hon’ble Madras High Court in the case

of CIT v. P.J. Thomas as reported in [1995] 211 ITR 897 (MAD.)

has held that:

ITA No.853 of 2017 10 Krishna Mohan Chourasia

“ _____________Even as regards the second question, it is seen that under section 2(14) of the Income-tax Act, 1961, the exclusion of agricultural land as capital asset, would be applicable to land within the limits of a municipality and not a panchayat. The land sold by the assessee was situate in Koshancherry town and that was only a panchayat. Though learned counsel for the Revenue strenuously contended that a panchayat would also be comprehended within section 2(14) of the Income-tax Act, 1961, we are unable to accept the contention. Section 2(14)(iii) refers to the exclusion as capital asset of agricultural lands situate in an area which is comprised within the jurisdiction of a municipality (whether known as municipality or municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment, which has a population of not less than 10,000 according to the last preceding census. In order that the benefit of exclusion of agricultural land as capital asset may not be available, the land should be situated within the jurisdiction of a municipality or a cantonment board as stated earlier and is also related to the population. Though the expression, "municipality, municipal corporation, notified area committed town area committee, town committee", etc., have been used they refer only to certain specific entities either known by that name or by any other name and that cannot be taken to apply to a panchayat which is and has also always been understood as distinct and different from municipality, etc. In the absence of clear or specific words in the section to take in a panchayat, we are unable to countenance the argument of learned counsel for the Revenue. We are satisfied that the Tribunal was quite justified in deleting the tax arising on capital gains on account of the sale of the agricultural lands by the assessee. The tax case petition is dismissed. There will be no order as to costs.”

In light of the facts re-iterated above and after going through the

findings of the Hon’ble Madras High Court (supra), we find that

there is a clear distinction between a municipality and a gram

panchayat as also enunciated in the judgment (supra), therefore,

we are of the view that the land in question was not situated

ITA No.853 of 2017 11 Krishna Mohan Chourasia

within the limit of any municipality or cantonment board. Thus,

in view of these facts and circumstances of the case, we find that

the agricultural land initially purchased by the assessee was not

a capital asset as per section 2(14)(iii) of the Act. Accordingly, the

amount of capital gain accruing to the assessee till the diversion

of agricultural land on 25.11.2010 shall not be eligible to tax.

Further, for the purpose of computation of the amount of capital

gain that shall be exempt from tax, the assessee submitted that

fair market value on the date of diversion shall be considered as

full value of consideration and such fair market value shall be

considered as cost for determination of the amount of capital gain

chargeable to tax subsequent to diversion of land. The assessee

filed detail regarding rate of compensation determined by the

Government in respect of compulsory acquisition at Page No. 64

of the paper book for determination of fair market value of land.

The fair market value of land determined by the Government was

Rs. 48,00,000/- per hectare. The assessee sold land admeasuring

1.515 hectares during the year and thus, fair market value of the

said land as on the date of diversion was Rs.72,72,000/-

(Rs.48,00,000/- * 1.515 hectares). Alternatively, the Ld. Counsel

for the assessee submitted that fair market value shall be

ITA No.853 of 2017 12 Krishna Mohan Chourasia

determined on the basis of reverse indexation method. The fair

market value of land computed on the basis of reverse indexation

method comes to Rs.68,90,415/-. The reverse indexation method

for determination of fair market value of a capital asset is duly

accepted and approved in the following judgments:

• Deen Dayal Rathi Vs ITO-3(4), Jodhpur – ITA No. 108/Jodh/2013 • Prem Bhai Kanji Bhai Tandel Vs ITO – ITA No. 192/Ahd/2016 • DCIT Vs Shri Rajendra Kumar Singhvi – ITA No. 313/Jodh/2010 • Dashrathbhai G Patel Vs DCIT – 182 ITD 327 (Ahd-Trib.) • Smt. Mina Deogun v. ITO [2008] 19 SOT 183 (Kol.) • Pfizer Ltd. v. Dy. CIT [2015] 56 taxmann.com 260/ 153 ITD 433 (Mum.) • CIT v. Ashven Datla [2013] 37 taxmann.com 261/ 218 Taxman 74 (Mag.)(AP)

On consideration of above, we find force in the contention of the

ld. Counsel for the assessee that fair market value of land as on

the date of diversion i.e. on 25.11.2010 shall be taken as

Rs.68,90,415/-. Thus, in our view, as discussed supra, capital

gain accruing to the assessee till the date of diversion using fair

market value of Rs.68,90,415/- shall be exempt from tax.

Further, we are of the view that fair market value of

Rs.68,90,415/- as on the date of diversion shall be considered as

cost of acquisition for the purpose of determination of the

amount of capital gain chargeable to tax during the year under

consideration. The indexed cost of acquisition of land comes to

ITA No.853 of 2017 13 Krishna Mohan Chourasia

Rs.91,00,000/- for the FY 2013-14 (AY 2014-15) which is as

under:

Fair market value of land as on 25.11.2010 i.e. during FY 2010- 11 which is considered as cost of acquisition for the purpose of computation of capital gain – Rs.68,90,415/- Cost inflation index for the FY 2010-11 – 711 Cost inflation index for the FY 2013-14 – 939 Indexed cost of acquisition – Rs.91,00,000/- (Rs.68,90,415/- * 939/711) Sale consideration – Rs.91,00,000/-

Thus, effectively there shall be no capital gain chargeable to tax

in the hands of the assessee during the AY 2014-15 in respect of

sale of land in question. The capital gain accruing to the assessee

till the date of diversion of land is exempt from tax as the land in

question was not a capital asset as per the provision of section

2(14)(iii) of the Act till the date of its diversion. Thereafter, capital

gain computed considering the fair market value of land on the

date of diversion of Rs.68,90,415/- comes to NIL and as such,

capital gain is chargeable to tax in the hands of the assessee. In

view of these facts in the light of the judicial pronouncements

(supra), we are of the view that the findings of ld. CIT(A) deserve

to be set aside and accordingly, we delete the addition of

Rs.88,78,365/- made on account of long-term capital gain on

ITA No.853 of 2017 14 Krishna Mohan Chourasia

sale of land. Thus, ground nos.1 to 3 raised in the appeal of the

assessee are allowed.

Ground No.4

Ld. CIT(A) confirming the addition of Rs.9,25,047/- made by the

Ld. Assessing Officer on account of long-term capital gain on

compulsory acquisition of land. Brief facts as culled out from the

orders of Revenue Authorities are that the assessee received the

compensation due to compulsory acquisition of land out of survey

no.83 for which the Assessing Officer made addition of

Rs.9,25,047/-.

Assessing Officer before the ld. CIT(A) who having gone through

the facts/circumstances, material and submissions confirmed

the addition. The ld. CIT(A) noted that the assessee received the

compensation due to compulsory acquisition of land out of

survey no.83 for which the taxability has already been decided

against the assessee and since the land has been held as capital

asset, the addition of Rs.9,25,047/- made by the Assessing

ITA No.853 of 2017 15 Krishna Mohan Chourasia

Officer is justified. Still aggrieved, the assessee is in appeal before

this Tribunal.

made before Revenue Authorities, submitted that the land

purchased by the assessee was a rural agricultural land and not

a capital asset as per section 2(14)(iii) of the Act. Accordingly,

compensation received by the assessee on compulsory

acquisition of its rural agricultural land shall not be chargeable

to tax under the IT Act, 1961. Per contra, ld. Sr. DR relied upon

the orders of the Revenue Authorities.

perused material available on record. We find that the

Government compulsorily acquired land admeasuring 0.180

hectares out of the land admeasuring 0.217 hectares which was

not diverted which makes it clear that the land compulsorily

acquired by the Government was agricultural land and not

diverted land. We find that in the order dated 25.11.2010 issued

by SDM, Narsinghgarh dated 25.11.2010 placed on Page No.

114-116 of the paper book, it is mentioned that the land

ITA No.853 of 2017 16 Krishna Mohan Chourasia

admeasuring 2.312 hectares was only diverted out of the total

area of land admeasuring 2.529 hectares situated at Survey no.

83, Village Lasudalya Ramnath, Halka no. 58, Village Kurawar,

Narsinghgarh, Rajgarh. We have also gone through the list of

land compulsorily acquired by the Government along with the

detail of compensation provided thereon placed on Page No. 64 of

the paper book wherein also it has been mentioned that the land

acquired by the Government was ‘irrigated land’. In view of these

facts, we are of the view that the land compulsorily acquired by

the Government was agricultural land and not diverted land. As

already discussed while adjudicating ground nos. 1 to 3 of the

appeal, the land purchased by the assessee was a rural

agricultural land and not a capital asset as per section 2(14)(iii)

of the Act, therefore, the compensation received by the assessee

on compulsory acquisition of its rural agricultural land shall not

be chargeable to tax under the IT Act, 1961. Even otherwise, once

it is established that land compulsorily acquired by the

Government was agricultural land, it makes no difference

whether the said land is rural or urban since compensation

received on compulsory acquisition of rural agricultural land is

not chargeable to tax under the IT Act, 1961 whereas

ITA No.853 of 2017 17 Krishna Mohan Chourasia

compensation received on compulsory acquisition of urban

agricultural land is exempt from tax as per section 10(37) of the

Act subject to conditions specified therein. However, since land

compulsorily acquired by the Government in the present case

was a rural agricultural land, there arises no question of

taxability of capital gain on compulsory acquisition of such land.

Accordingly, we set aside the findings of Ld. CIT(A) and delete the

addition of Rs.9,25,047/- made on account of long-term capital

gain on compulsory acquisition of land. Thus, ground no.4 raised

in the appeal of the assessee is allowed.

Ground No.5

Ld. CIT(A) confirming the addition of Rs.3,42,358/- made by the

Assessing Officer on account of long-term capital gain on

compulsory acquisition of a part of his house. Brief facts as culled

out from the orders of Revenue Authorities are that the assessee

received the compensation of Rs.8,03,041/- due to compulsory

acquisition of part of house. The Assessing Officer noted that the

part of house is nothing but a capital asset because in the year

2001, the assessee had taken the permission from Gram

ITA No.853 of 2017 18 Krishna Mohan Chourasia

Panchayat for building construction which was approved by the

Gram Panchayat.

Assessing Officer before the ld. CIT(A) who having gone through

the facts/circumstances, material and submissions confirmed the

addition. Still aggrieved, the assessee is in appeal before this

Tribunal.

made before Revenue Authorities, submitted that the part of the

house of the assessee was merely demolished and that there was

no transfer of any capital asset so as to attract capital gains tax

in the hands of the assessee. With regard to compulsory

acquisition of plot area of 250 Sq Fts, the ld. Counsel for the

assessee submitted that the assessee merely received an amount

of Rs. 15,840/- as compensation in lieu of compulsory acquisition

of plot area which was less than the cost of acquisition of the said

plot area, therefore, no capital gain was chargeable in the hands

of the assessee even in respect of compulsory acquisition of plot

area. Per contra, ld. Sr. DR relied upon the orders of the Revenue

Authorities.

ITA No.853 of 2017 19 Krishna Mohan Chourasia

perused material available on record. We find that the assessee

owned a house situated at Ward No. 7, Village Kurawar,

Narsinghgarh, Rajgarh wherein the plot area was 1,250 Sq Fts

and constructed area was 5,000 Sq Fts. The Government

compulsorily acquired plot area of 250 Sq Fts against which

compensation of Rs. 15,840/- was awarded to the assessee and

also demolished constructed area of 1,000 Sq Fts (250 Sq Fts * 4

floors) against which compensation of Rs. 7,87,201/- was

awarded to the assessee thereby totaling to Rs. 8,03,041/-. The

cost of house appearing in the balance sheet of the assessee was

of Rs.10,45,000/- and accordingly the proportionate cost of part

of the house demolished and compulsorily acquired by the

Government comes to Rs.2,09,000/- (Rs. 10,45,000/- *

1,000/5,000). We find that the Assessing Officer worked out the

amount of capital gain on compulsory acquisition of part of the

house of the assessee as under:

Full value of consideration i.e. compensation received on compulsory acquisition of part of house – Rs.8,03,041/- Proportionate cost of part of the house demolished and compulsorily acquired by the Government – Rs. 2,09,000/- Cost inflation index for the FY 2001-02 – 426 Cost inflation index for the FY 2013-14 – 939

ITA No.853 of 2017 20 Krishna Mohan Chourasia

Indexed cost of acquisition – Rs.4,60,683/- (Rs.2,09,000/- * 939/426) Long-term capital gain – Rs.3,42,358/-

On consideration of above, we find that the Government merely

acquired 250 Sq Fts of plot area and demolished the constructed

area of house of the assessee built upon such plot area at the

time of compulsory acquisition. We find force in the arguments of

the Ld. Counsel for the assessee that part of the house of the

assessee was merely demolished and that there was no transfer

of any capital asset so as to attract capital gains tax in the hands

of the assessee. Thus, we are of the view that there was no

transfer as per section 2(47) of the Act at the time of demolition of

part of the house of the assessee and accordingly, no capital gain

is taxable in the hands of the assessee in respect of demolition of

part of his house. So far as the compulsory acquisition of plot

area of 250 Sq Fts is concerned, we find that the assessee merely

received an amount of Rs. 15,840/- as compensation in lieu of

compulsory acquisition of plot area which was way less than the

cost of acquisition of the said plot area which comes to

Rs.49,331/- (Rs. 2,25,000/- (+) Rs. 21,655/- *250/1,250) as is

evident from the purchase registry which has been filed on Page

No. 52-58 of the paper book. Therefore, no capital gain was

ITA No.853 of 2017 21 Krishna Mohan Chourasia

chargeable in the hands of the assessee even in respect of

compulsory acquisition of plot area. Further, the assessee

incurred substantial repair and renovation expenses to the tune

of Rs.5,23,817/- to bring back the house to a suitable condition

for living subsequent to demolition done by the Government.

Thus, it is clear that the assessee did not earn any long-term

capital gain. In view of these facts and circumstances, we set

aside the findings of ld. CIT(A) and delete the addition of

Rs.3,42,358/- made on account of long-term capital gain on

compulsory acquisition of a part of the house of the assessee.

Accordingly, ground no.5 raised in the appeal of the assessee is

allowed.

Ground No.6

ld. CIT(A) confirming the addition of Rs.12,86,090/- made by the

Assessing Officer on account of unexplained/bogus liability by

treating it as unexplained credit u/s 68 of the IT Act, 1961. Brief

facts as culled out from the orders of Revenue Authorities are

that an amount of Rs.12,86,090/- was added by the Assessing

Officer on account of agricultural land in the head “assets” in the

ITA No.853 of 2017 22 Krishna Mohan Chourasia

balance-sheet on the ground that during the course of

assessment proceedings, in the statements u/s 131 of the I.T.

Act, recorded by the Assessing Officer, the assessee failed to

explain the source of the investment and also failed to produce

books of accounts and any other documentary evidences in

support of the claimed liability.

Assessing Officer before the ld. CIT(A) who having gone through

the facts/circumstances, material and submissions confirmed

the addition on the ground that the assessee failed to discharge

the burden of proof by not establishing the source of investment.

Still aggrieved, the assessee is in appeal before this Tribunal.

submissions made before Revenue Authorities, submitted that

corresponding adjustment in respect of addition made to

agricultural land was not routed through the capital account

rather the amount of cash to the extent of Rs.12,86,090/- was

transferred from the books of accounts of the business to the

personal books of accounts of the assessee and the agricultural

land in question was purchased during the A.Y. 2013-14 and not

ITA No.853 of 2017 23 Krishna Mohan Chourasia

during the AY 2014-15. But, the Assessing Officer made the

addition on mere surmises and conjectures. Per contra, ld. CIT-

DR relied upon the orders of the Revenue Authorities.

perused material available on record. We find that the assessee

purchased an agricultural land situated at Village Lasudalya

Ramnath, Halka no. 58, Village Kurawar, Narsinghgarh, Rajgarh

on 30.03.2013 for a basic consideration of Rs.11,00,000/- during

the AY 2013-14. The assessee further paid stamp duty of

Rs.1,64,820/- and incurred various other expenses in connection

with purchase of the said land. Thus, total cost of land for the

assessee came to Rs.12,86,090/- which though pertained to AY

2013-14 but was incorporated in the books of accounts only

during the AY 2014-15. But, the Assessing Officer presumed that

there was a strong possibility of bogus liability since the assessee

could not furnish any explanation regarding the corresponding

adjustment entry in the liability side of the balance sheet.

However, we find that the ld. Counsel for the assessee

categorically explained that corresponding adjustment in respect

of addition made to agricultural land was not routed through the

capital account but rather the amount of cash to the extent of

ITA No.853 of 2017 24 Krishna Mohan Chourasia

Rs.12,86,090/- was transferred from the books of accounts of the

business to the personal books of accounts of the assessee. Thus,

the source of agricultural land purchased by the assessee was

duly explained. We also find that the agricultural land under

consideration was purchased during the AY 2013-14 and not

during the AY 2014-15. Therefore, addition of Rs.12,86,090/- is

not sustainable on this count also. In view of these facts, the

order of ld. CIT(A) on this issue deserves to be set aside.

Accordingly, we delete the addition of Rs.12,86,090/- made u/s

68 of the I.T. Act, 1961. Thus, ground no.6 raised in the appeal of

the assessee is allowed.

Ground Nos.7

Ld. CIT(A) confirming the addition of Rs.4,12,148/- made by the

Assessing Officer on account of estimation of N.P. @ 8%. Brief

facts as culled out from the orders of Revenue Authorities are

that the Assessing Officer estimated the n.p. at 8% as the

Assessing Officer was of the view that in the absence of books of

accounts, the assessee failed to explain the income earned from

the business.

ITA No.853 of 2017 25 Krishna Mohan Chourasia

Assessing Officer before the ld. CIT(A) who having gone through

the facts/circumstances, material and submissions confirmed the

addition on the ground that in the absence of books of accounts,

the Assessing Officer had no option but to estimate the income of

the assessee by adopting reasonable n.p. Still aggrieved, the

assessee is in appeal before this Tribunal.

made before Revenue Authorities, submitted that books of

accounts of the business carried out by the assessee were

misplaced. However, the assessee was subject to tax audit for the

AY 2014-15 under consideration and his books of accounts were

duly audited by an independent Chartered Accountant and the

financial results of the assessee for the year ended 31.03.2014

were comparable with the results of the preceding as well as

subsequent years. Per contra, ld. CIT-DR relied upon the orders

of the Revenue Authorities.

perused material available on record. We find that the Assessing

Officer estimated the N.P. @ 8% since the assessee could not

ITA No.853 of 2017 26 Krishna Mohan Chourasia

produce his books of accounts during the course of assessment

proceedings and accordingly added the differential amount of

Rs.4,12,148/- to the total income of the assessee. From the

perusal of the copy of N.C.R. (Non Cognizable Offence Information

Report) filed in the Hanumanganj Police Station, Bhopal placed

on Page No. 78-79 of the paper book, we find that it was claimed

that books of accounts of the business carried out by the

assessee were misplaced. However, we find that books of

accounts for the assessment year 2014-15 under consideration

were duly audited by an independent Chartered Accountant.

Therefore, the assessee cannot be put in a disadvantageous

position merely for the reason that his books of accounts were

misplaced after the audit was conducted by an independent

Chartered Accountant. We are of the view that the Assessing

Officer/ld. CIT(A) failed to bring on record any evidence to

controvert the financial results as per the audited final accounts

of the assessee for the year ended 31.03.2014 rather the

Assessing Officer estimated the net profit of @ 8% in adhoc

manner which is not justified. The Assessing Officer/ld. CIT(A)

did not consider the fact that the financial results of the assessee

for the year ended 31.03.2014 were comparable with the results

ITA No.853 of 2017 27 Krishna Mohan Chourasia

of the preceding as well as subsequent years. Further, the

Chartered Accountant who audited the books of accounts also did

not give any adverse findings regarding the books of accounts

maintained by the assessee. In view of these facts and

circumstances, the addition is not justified. Thus, the findings of

Ld. CIT(A) deserves to be set aside. Accordingly, we delete the

addition of Rs.4,12,148/- made on account of estimation of N.P.

@ 8%. Therefore, ground no.7 raised in the appeal of the assessee

is allowed.

No.853/Ind/2017 is allowed.

Order pronounced as per Rule 34 of ITAT Rules, 1963 on 30.9.2021.

Sd/- Sd/- (RAJPAL YADAV) (MANISH BORAD) VICE PRESIDENT ACCOUNTANT MEMBER

�दनांक / Dated : 30.9.2021 !vyas!

Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore