M/S. ANAND SAGAR REAL ESTATES PVT. LTD.,INDORE vs. THE CIT-1, INDORE

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ITA 336/IND/2015Status: DisposedITAT Indore02 January 2019AY 2010-1110 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal found that the AO had not specifically inquired about the exemption claim and had not addressed the assessee's contention of intending to build a water park. The Tribunal directed the AO to conduct further inquiries on these points.

What were the facts?

The assessee claimed exemption on the sale of agricultural land, treating it as a capital asset. The CIT invoked Section 263, believing the Assessing Officer (AO) had not properly investigated the nature of the land sale and that the assessment order was erroneous and prejudicial to revenue.

What were the issues?

Whether the CIT was justified in invoking Section 263 when the AO had made inquiries and the assessee had provided explanations regarding the sale of agricultural land. The core issue is the proper classification of the land sale as capital gain or business income.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 2(14)(iii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, INDORE BENCHE, INDORE

Before: SHRI KUL BHARAT & SHRI MANISH BORAD

For Appellant: Shri Anil Kamal Garg &
For Respondent: Smt. Ashima Gupta, CIT-DR
Hearing: 10.12.2018Pronounced: 02.01.2019

ITA No.336/Ind/2015 M/s. Anand Sagar Real Estates Pvt. Ltd., Indore आयकर अपील�य अ�धकरण, इ�दौर �यायपीठ, इ�दौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCHE, INDORE

BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER

ITA No.336/Ind/2015 Assessment Year: 2010-11

M/s. AnandSagar Real Estates CIT-I Pvt. Ltd. Indore बनाम/ Anil Kamal Garg& Company, Vs. Chartered Accountants, 97, Jaora Compound Indore (MP)-452001 (Appellant) (Revenue ) P.A. No.AAGCA4078F Appellant by Shri Anil Kamal Garg & Arpit Gour, CAs. Revenue by Smt. Ashima Gupta, CIT-DR Date of Hearing: 10.12.2018 Date of Pronouncement: 02.01.2019 आदेश / O R D E R PER KUL BHARAT, J.M: This appeal is filed by the assessee against the order of

Ld. CIT(A)-I, Indore, dated 31.03.2015pertaining to the A.Y.

ITA No.336/Ind/2015 M/s. Anand Sagar Real Estates Pvt. Ltd., Indore

2010-11. The assessee has raised following grounds of

appeal:

“Grounds of Income-Tax Appeal before the Hon'ble Income-Tax Appellate Tribunal, Indore Bench, Indore, against the Order passed by the Commissioner of Income- Tax-I, Indore, u/s. 263 of the Income-Tax Act, 1961, pertaining to the assessment year 2010-11.

1(a). That, on the facts and in the circumstances of the case, the learned CIT grossly erred in invoking the provisions of section 263 of the Income- Tax Act, 1961 in the appellant's case without considering the material fact that the Assessment Order passed by the learned Assessing Officer was neither erroneous nor prejudicial to the interest of the Revenue.

(b). That, the learned CIT grossly erred, both on facts and in law, in assuming the jurisdiction u/s. 263 of the Income-Tax Act, 1961 without considering the material fact that during the course of the assessment proceedings, the appellant had brought on record all the materials and evidences relating to the concerning issues and the same were duly verified by the AO after proper application of his mind. 2. That, without prejudice to the above, the learned CIT grossly erred, both on facts and in law, in setting aside the assessment order passed by Assessing Officer under section 143(3) of the Income-Tax Act, 1961 merely for conducting more enquiries without first forming any opinion that the original Assessment Order passed by the AO was prejudicial to the interest of the Revenue. 3. That, without prejudice to the above, the learned CIT grossly erred in giving a direction to the AO to make fresh enquiry and investigation on certain issues in respect of which the Assessing Officer passing the Order had already formed certain opinion after proper application of mind.

4.

That, without prejudice to the above, the learned CIT grossly erred in not considering the settled position of law fact that there is no embargo in the scheme of the Income-Tax Act, 1961 that one assessee can simultaneously be an investor and as also a trader in real estate.”

ITA No.336/Ind/2015 M/s. Anand Sagar Real Estates Pvt. Ltd., Indore 2. Briefly stated the facts are that in this case the

assessment was completed by the assessing officer vide

order dated 22.03.2013 u/s 143(3) of the Income Tax Act,

1961 (hereinafter referred to as Act) assessing total income

of Rs.9,02,74,441/-. Subsequently, the Ld. CIT(A) after

examining the records found that the assessment has been

framed without applying mind and making investigation on

the issues which resulted into the order being erroneous

but also prejudicial to the interest of the revenue.

Accordingly, notice u/s 263 of the Act was issued to the

assessee calling upon as to why the assessment so framed

may not be revised. The basis of the issuing notice was that

during the assessment year 2010-11 the assessee had sold

8.683 hectare land situated at village Gokanya on

21.08.2009 for Rs.4,50,55,500/-. The land was purchased

on 06.09.2008 for the purchase consideration of

Rs.69,71,440/- and registry expenses of Rs.6,74,158/-.

ITA No.336/Ind/2015 M/s. Anand Sagar Real Estates Pvt. Ltd., Indore Thus, the total cost of land was worked out at

Rs.76,45,598/- and long term capital gain was worked out

at Rs.3,74,09,902/-. The assessee company claimed this

profit as exempt on the plea that the agricultural land so

sold was out of the ambit of definition of the capital assets

u/s 2(14)(iii) of the Act. It was observed by the Ld. CIT(A)

that during the year under consideration the assessee had

also sold agricultural land situated at village Gokanya held

as stock in trade at Rs.14,43,52,000/- on which trading

profit of Rs.5,41,34,250/- was worked out which was

included in the profit on sale of agricultural land shown in

Profit & Loss account at Rs.9,91,89,750/-. In response to

the notice issued, assessee filed a detailed reply however

the Ld. CIT(A) did not found the reply of the assessee as

satisfactory hence he revised the assessment order by

setting aside the assessment order for framing assessment

orders, afresh in the light of the observations made in the

ITA No.336/Ind/2015 M/s. Anand Sagar Real Estates Pvt. Ltd., Indore impugned order. Against this the assessee is in present

appeal.

3.

Ld. Counsel for the assessee vehemently argued that

the impugned order is unjustified and is contrary to law.

Ld. Counsel submitted there is no embargo under the law

for keeping two portfolio. He submitted that merely because

the assessee is engaged in the business of real estate would

not prevent him from keeping part of land as investment.

Ld. Counsel laid great emphasis on submission that this

part of land was kept for establishing a project of water

park but due to paucity of water this idea was dropped and

land was kept as investment. He submitted that authorities

below have wrongly appreciated the facts. Ld. Counsel

made written submission in response to the query of the

Bench. The contentions thereof are as under:

This has a reference to the hearing in the case of the captioned appellant had by Your Honours on 20-11-2018. During the course of the hearing, it was submitted by the undersigned that due to clerical error, entire purchase cost of the agricultural land, admeasuring 16.782 hectares got adjusted against the partial sale of 8.099 hectares of land sold in the 5

ITA No.336/Ind/2015 M/s. Anand Sagar Real Estates Pvt. Ltd., Indore

earlier fmancial year relevant to A.Y. 2009-10. It was submitted that due to such clerical error, value of the unsold land at Rs.76,45,598/-, which ought to have been shown in the balance sheet as of31-03-2009, had got escaped to be shown as such. Upon making such argument, this Hon'ble Bench specifically sought the clarification from the undersigned as to whether or not such clerical error was brought to the notice of the then AO during the course of the original assessment proceedings.

Your Honours, briefly stated, the case of the appellant is that in its case, the ld, CIT was not justified in assuming the jurisdiction under s.263 of the Income- Tax Act, 1961 on the issue of treatment of surplus arising on sale of certain agricultural land to the appellant during the relevant previous year. The appellant claims that it had purchased 16.782 hectares agricultural land for a total consideration of Rs.l,4 7,76,9701- [including registration cost] during the previous year relevant to A.Y. 2009-10 and out of such purchases, it had sold agricultural land admeasuring 8.099 hectares in the same financial year i.e. the financial year relevant to A.Y. 2009-10. It has been claimed by the appellant that remaining 8.683 hectares agricultural land was sold by it during the previous year relevant to A. Y. 2010-11 and surplus arising on such sale was treated by it as capital receipts. Since the land was not falling within the definition of the expression 'capital assets' under s.2(l4) of the Act being out of the prescribed limit of the municipal limit, the entire capital receipt was claimed as exempted. It has also been claimed by the appellant that in the original assessment proceedings under s.143(3), the AO had raised specific query on the issue of claim of exemption, by way of issuance of two notices which are placed on record at page no. 35 &40 of the Paper Book. It is also being claimed by the appellant that the full details along with the documentary evidences were duly furnished by the appellant vide its letters which are placed at page no. 52 to 55 &68 to 72 of the Paper Book. It was also demonstrated before the Hon'ble Bench that the AO after making necessary verification, had found the claim of the appellant as genuine and a specific finding to this effect was given by him at para (2) of his Assessment Order. The Hon'ble Bench then wanted to know about the treatment of the unsold agricultural land in the balance sheet for the earlier year. It was submitted that due to clerical error, the entire value of purchase was claimed as expense instead of claiming only proportionate value as expense and showing the remaining in the balance sheet. It was shown that it was a clerical error having no impact on the taxable income of the appellant for any of the years. Thereafter, this Hon'ble Bench raised the query as mentioned in the first para above.

Now, in respect of the specific query raised by the Hon'ble Bench, it is respectfully submitted that during the course of the original

ITA No.336/Ind/2015 M/s. Anand Sagar Real Estates Pvt. Ltd., Indore assessment proceedings, the ld. AO vide point no.l0(a) of his notice under s.142(1) dated 09-11-2012 [placed at page no.35 of the Paper Book], asked the appellant to furnish the justification of the profit on sale of land at Rs.9,91,89,750/- shown in the Profit &Loss Account. In response to such query, the appellant, vide its counsel's letter dated 03-01-2013 [Page No. 52 of Paper book], furnished the complete details. It was explicitly made clear that out of the profit of Rs.9,91,89,750/- shown in the Profit &Loss Account, Rs.5,41,34,250/- was a business profit and a sum of Rs.3,74,09,902/- was claimed as surplus on sale of agricultural land held as investment. It was also specifically mentioned that the remaining sum of Rs.76,45,598/- was the prior period profit, being capital gain, on sale of agricultural land held as investment relevant to A.Y. 2009-10. Before the AO, the issue was further clarified, at length, at para (v) of point no.l0 of the aforesaid submission letter dated 03-01-2013 [kindly refer PB Page No. 53]. Further, a revised working of the gain for the A.Y. 2009-10 was also filed before the Id. AO. A copy of the same is also placed at page no. 84 of our Paper Book In sum and substance, it is humbly submitted that during the course of the original assessment proceedings, all the relevant issues were duly discussed by the ld. AO, which inter alia, includes the issue of Rs.76,45,598/- as raised by the Hon'ble Bench. In these circumstances, it is once again prayed that the Order so passed by the ld. CIT under s.263 of the Act deserves to be quashed.

4.

Ld. CIT-DR opposed the submissions and supported

the order of the authority below. He submitted that the AO

in the original assessment proceeding grossly erred in

making inquiry related to sale of land in question. He

contended that the AO mechanically accepted the reply

without making efforts to dig out the facts. Thus, this has

ITA No.336/Ind/2015 M/s. Anand Sagar Real Estates Pvt. Ltd., Indore caused the assessment order being erroneous so far it is

prejudicial to the interests of the Revenue.

5.

We have heard the rival submissions, perused the

materials available on records and gone through the orders

of the authorities below. Law is well settled that the Ld.

CIT can invoke provisions of section 263 of the Act and

revise the assessment framed by the A.O., if he is satisfied

that the order passed is erroneous so far as it is prejudicial

to the interest of the revenue. In the present case, Ld. CIT

has revised the concluded assessment by setting aside

assessment to the A.O. for de-novo assessment. It is

submitted by the Ld. Counsel for the assessee that the

assessee can have two portfolios, one is in the nature of

investment, another being business. The assessee is

engaged in business of real estate. The Ld. CIT in the

impugned order has observed that the sale of land in the

same locality is treated as the business receipts. However,

ITA No.336/Ind/2015 M/s. Anand Sagar Real Estates Pvt. Ltd., Indore in respect of the land in question, the assessee has claimed

it as an investment. Further, the assessee claimed it as

exempt being an agricultural land. In the opinion of the

Ld. CIT, A.O. had not carried out enquiry related to

treatment of the sale price of the said land. It is contended

by the Ld. Counsel for the assessee that land in question

was not part of stock in trade as the assessee wanted to

establish a water park. We have given our thoughtful

consideration to the contention of the representatives of the

parties. We are unable to accept this contention that

assessing officer had raised a specific query as to why the

assessee has treated sale consideration as exempt. The Ld.

CIT has also not dealt with the contention that the

assessee wanted to establish a water park. Under these

facts, we deem it proper to modify the direction of the Ld.

CIT and direct the A.O. to make enquiry, whether the

assessee had made any efforts to establish a water park on

ITA No.336/Ind/2015 M/s. Anand Sagar Real Estates Pvt. Ltd., Indore the land in question. Further, the A.O. would also consider

contention of the assessee that there was a typographical

error in the accounts of the assessee. Grounds raised in

this appeal are allowed for statistical purposes as indicated

above.

6.

In the result, the appeal filed by the assessee is

allowed for statistical purposes.

Order was pronounced in the open court on 02 .01.2019.

Sd/- Sd/-

(MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER

Indore; �दनांक Dated : 02/01/2019 VG /SPS

Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order

Assistant Registrar, Indore

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