SHRI RAJESH RAMCHANDRA DAKE,PANVEL vs. DY CIT CC-1, MUMBAI

ORDER \n\nPer: Narender Kumar Choudhry, Judicial Member:\n\nThis instant appeal and Cross Objection have been preferred by the Assessee and the Revenue Department respectively, against the order dated September 29, 2019 impugned herein passed by the Ld. Commissioner of Income Tax (Appeals)-11, Pune (in short \"Ld. Commissioner\") under Section 250 of the Income Tax Act, 1961 (in short 'the Act') for the Assessment Year (in short 'AY') 2008-09.\n\n2. Relevant facts in brief for adjudication of the present litigations are that a search action under Section 132 of the Act was carried out in Valuable group of cases and its associate concerns on April 10, 2013 which were engaged in the business of media technology and infrastructure development. Search action under Section 132 on April 10, 2013 was also carried out at the residential premises of the Assessee. Consequently, on the basis of search, the notice dated October 26, 2013 was issued to the Assessee, whereby he was requested to prepare a true and correct return of income for the assessment year under consideration. The Assessee in response filed its return of income on December 15, 2013 by declaring total income of Rs.37,81,904/- as against the income of Rs.37,81,900/- as declared previously by filing his original return of income under Section 139(1) of the Act on March 31, 2010, which was initially processed under Section 143(1) of the Act and thereafter resulted into passing the assessment order dated December 14, 2010 under Section 143(3) of the Act assessing the total income of the Assessee at Rs.37,81,900/-. The AO in the assessment order dated March 31, 2016 under Section 143(3) read with Section 153A of the Act has also made two additions of Rs.6,81,11,103/- on account of brokerage income and Rs.10,42,97,083/- on account of short-term capital gain. The Assessee, being aggrieved, before the Ld. Commissioner also challenged these additions along with other addition of Rs.15,00,000/- which is not in controversy before us.\n\n2.1 The Ld. Commissioner affirmed the addition of Rs.6,81,11,103/- in total, however partly sustained the addition of Rs.10,42,97,083/- to the extent of Rs.9,61,76,321/- (Rs.4,44,48,125/- + Rs.5,17,28,196/- respectively, as short-term capital gain and long-term capital gain).\n\n3. Both the parties i.e. the Assessee and the Revenue Department have challenged the impugned order by filing instant Appeal and CO respectively.\n\n4. The Assessee has raised the following original grounds and additional grounds of appeal:

11. Pune erred in law and on facts in not appreciating the confirmation given by M/s Valuable Infrastructure Private Limited stating that no such income has accrued to the Appellant to the tune of INR 6,81,11,103/-.\n\n3. BECAUSE, Ld. CIT(A)-

11. Pune erred in law and on facts in upholding the addition to the tune of INR 10,42,97,083/- even though the same is exempt under Section 10 of Income Tax Act, 1961 being sale of agricultural land.\n\n4. BECAUSE, Ld. CIT(A)-

11. Pune erred in law and on facts in not appreciating the revenue records (7/12 extract) maintained by talathi under state laws, which evident that the land was agricultural land and was being cultivated with crops.\n\nThe Appellant craves leave to add, alter, amend, modify or delete any of the ground. PRAY JUSTICE\"\n\nAdditional Grounds of Appeal:\n\"BECAUSE in the facts and circumstances of the case, Ld. Deputy Commissioner of Income-tax, Central Circle - 1, Thane erred in framing an assessment order under Section 153A read with Section 143(3) of the Act and Ld. CIT(A) erred in upholding the action of the Deputy Commissioner of Income-tax, Central Circle - 1, Thane inasmuch as no incriminating documents belonging to the appellant are found during the course of search and seizure proceedings carried out on the appellants and hence, the impugned assessment order dated: March 31, 2016 is bad in law and needs to be quashed\"\n\n5. The Revenue Department has raised the following grounds/objections in CO:\n\n\"1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in computing the sale consideration received from sale of lands under the head 'capital gains, without appreciating the fact that assessee is not the owner of the said lands.\n\n2. On the facts and in the circumstances of the case, the Ld. CIT(A) has failed to appreciate that the profit from impugned sale of lands of Rs.10,42,97,083/- should be computed under the head 'income from other sources.\"\n\n6. As in the present litigations, the controversy involved relates to making of two additions of Rs.6,81,11,103/- and Rs.10,42,97,083/- respectively on account of alleged brokerage income and Short-Term Capital Gain (STCG) earned from the sale of lands by the Assessee as made by the AO and affirmation of the addition of Rs.6,81,11,103/- in full and of Rs.10,42,97,083/- in part to the extent of Rs.9,61,76,321/- (Rs.4,44,48,125/- + Rs.5,17,28,196/- respectively as short-term capital gain and long-term capital gain), hence for the sake of brevity, we are inclined to decide the present litigations on the basis of additions/issues individually.\n\n7. Coming to the 1st issue/addition of Rs.6,81,11,103/-, we observe that the Assessee, in his books of accounts for the AY under consideration, has shown an amount of Rs.6,81,11,103/- as advance received from M/s. Valuable Infrastructure Pvt. Ltd. (in short \"VIPL\") and therefore in order to verify the same, the Assessing Officer (AO) vide order sheet noting dated March 7, 2010 asked the Assessee to submit supporting evidence in support of the same. Simultaneously the AO during the course of assessment proceedings of M/s. Valuable Properties Pvt. Ltd. (in short \"VPPL\") on verification has observed that the Assessee has received brokerage of Rs.6,81,11,103/- from VPPL and the said payment was made by VIPL on behalf of VPPL. However, the Assessee has not offered the income of brokerage of aforesaid amount, but has shown the same in the balance sheet, as advance received and therefore the AO show caused the Assessee.\n\n7.1 The Assessee in response to show cause, before the AO contended that the said amount was received as advance for lands, however the AO not being impressed with said contention, ultimately made the addition of Rs.6,81,11,103/- by holding as under:\n\n\"The Assessee's contention that it is an advance against land cannot be accepted, as the Assessee has not shown any sale of land to VPPL or VIPL against the alleged advance received for land and also not returned the alleged advance to VPPL or VIPL. Without prejudice to the above findings, alternatively the same can be considered as income under Section 41(1) of the Act. The Assessee has received the brokerage income but failed to offer the same to tax and therefore brokerage income of Rs.6,81,11,103/- is added to the total income\".\n\n8. The Assessee, being aggrieved, challenged this addition along with another addition {which we will deal later}, before the Ld. Commissioner and mainly claimed as under:\n\n\"If the amount of Rs.6,81,11,103/- was brokerage then VIPL and/or VPPL would have deducted tax as per the provision of Section 194H of the Act. As no TDS was deducted therefore the payments cannot be treated as brokerage income of the Assessee. The Assessee also claimed that the AO was orally requested to allow the Assessee to cross examine the Directors of VIPL or VPPL. However, the AO, without giving any opportunity to the Assessee to cross-examination has made the said addition. The Assessee before the Ld. Commissioner also filed additional evidence in the form of confirmation letter from VPPL wherein a confirmation of payment of Rs.8,84,87,859/- given to the Assessee and ledger confirmations in the books of VPPL of the amount of the Assessee from F.Y. 2007-08 to 2014-15 were also filed and it was also stated in the letter that the land deal was not concluded and the same is yet to be recovered from Mr. Rajesh Dake and that the payments were given as advance for purchase of agricultural land\".\n\n8.1 The Assessee before the Ld. Commissioner also filed certain documents as additional evidence and therefore the Ld. Commissioner vide letter dated April 30, 2019, forwarded the same to the AO for his comments.\n\n8.2 The AO though conducted the enquiry in the remand proceedings, however by submitting remand report dated June 6, 2019, formally objected to the admissibility of the additional evidence filed by the Assessee in the appeal proceedings, by submitting as under:\n\n\"4.1 In the present case, the case of the assessee does not fall with the any of the exceptions in Rule 46A. The assessee is not entitled to produce oral or documentary evidence afresh before the appellate authority, as a matter of right. Under special and/or certain circumstances only, as mentioned, in clauses (a), (b), (c), & (d) of Rule 46A(1) additional evidence can be adduced. Rule 46A itself contains the principles of natural justice. That being so, sub rule(4) of Rule 46A, does not permit to accept any additional evidence in contravention of provisions of sub rule (2) &(3) of Rule 46A. Ample opportunities were provided to the assessee during the assessment proceedings to present his case before the AO. However, the assessee failed to present his case by submitting cogent evidences during the assessment. The evidence now sought to be adduced was never filed before the AO and the assessee had not even filed this explanation. Hence, it is requested that this additional evidence filed by the assessee, may not be admitted\".\n\n8.3 The Ld. Commissioner before going into the admissibility of the confirmation of letter from VPPL qua payments made to the Assessee as advance for purchase of agricultural lands, preferred to examine the nature of confirmation letter etc. and observed as under:\n\n\"That search in the case of Assessee was carried out as part of search on the Valuable Group of cases and its associates' concerns, which are all engaged in the business of media technology and infrastructure. The Assessee is also closely associated with the group. The AO has clearly mentioned in the assessment order at para 8 that vide order sheet noting dated March 7, 2010 the Assessee was asked to submit supporting evidence in respect of advance of Rs.6,81,11,103/- shown in his books of account as received from VIPL. It is only during the assessment proceedings of VPPL, the AO could discover that the Assessee had received brokerage from VPPL though the payment was made by VIPL on behalf of VPPL. The confirmation letter from VPPL along with ledger account of the Assessee in the books of VPPL for the period April 1, 2007 to March 31, 2015, indicating advance of Rs.8,84,87,859/- as on May 22, 2009 and Journal entry of Rs.6,81,11,103/- on the basis of voucher No.1436, as an amount paid to Mr. Rajesh Dake by VIPL on April 15, 2008. These account statements were not available to the AO at the time of assessment proceedings and the books of accounts of VPPL and VIPL were also not available at the time of search, as is shown in the ledger account on April 15, 2008. The sum of Rs.6,81,11,103/- is only a Journal entry through VIPL expense payable account, except for the document which is being produced now, there is no independent verification is possible regarding veracity of the payment entry. However, the fact is that even in the confirmation filed from VPPL, it is stated that the same is yet to be received from Mr. Rajesh Dake as reportedly the deal was not concluded. No facts regarding the proposed deal were brought on record either during the assessment proceedings or during the appellate proceedings\".\n\n8.4 The Ld. Commissioner therefore on the aforesaid reasons agreed with the preliminary objection raised in Remand Report by the AO that sufficient opportunities were given in the assessment proceedings to provide documentary evidence in support of his claim in the books of account that the amount was shown as advance received from VPPL. Even during the appellate proceedings, no sufficient cause within the meaning of Rule 46A(4) of the Income Tax Rules 1962 (in short 'Rules') has been brought on record, to indicate that the Assessee was prevented from producing evidence, which he was called upon to produce by the AO.\n\n8.5 The Ld. Commissioner further even on merits observed that the confirmation and ledger account cannot be relied upon, as the necessary supporting details such as the details of proposed land deal, why the land deal could not be materialized, why the money to the extent of Rs.6,81,11,103/- if it is an advance, yet to be returned by Mr. Rajesh Dake, if the deal could not materialize. Further, while the confirmation letter claims that the deal was not concluded and the same is yet to be received from Mr. Rajesh Dake i.e. the Assessee, the letter does not bear the date of issue to Mr. Rajesh Dake and it is not clear, as till what date this amount is outstanding in the hands of the Assessee or is it that it is still outstanding till as on date, which makes it extremely suspect and therefore low in evidentiary value.\n\n8.6 The Ld. Commissioner ultimately by holding that in view of the above, both under Rule 46A of the Rules and on merits, the above said additional evidence of the Assessee is not accepted and therefore there is no ground to interfere with the addition made of Rs.6,81,11,103/- in the hands of the Assessee by the AO, treating the said receipts as un-explained income.\n\n9. The Assessee by filing a petition for admission of additional ground under Rule 11 of the Appellate Tribunal Rules, 1963, has raised the following ground of appeal:\n\n\"BECAUSE in the facts and circumstances of the case, Ld. Deputy Commissioner of Income-tax, Central Circle - 1, Thane erred in framing an assessment order under Section 153A read with Section 143(3) of the Act and Ld. CIT(A) erred in upholding the action of the Deputy Commissioner of Income-tax, Central Circle - 1, Thane inasmuch as no incriminating documents belonging to the appellant are found during the course of search and seizure proceedings carried out on the appellants and hence, the impugned assessment order dated: March 31, 2016 is bad in law and needs to be quashed\".\n\nThe Assessee in support of aforesaid ground of appeal, has placed reliance on the decision of National Thermal Power Corporation Ltd. vs. CIT (1998)

97. Taxman 358 (SC).\n\n10. On the contrary the Ld. D.R. refuted the claim of the Assessee.\n\n11. We have heard the parties and considered the rival claims of the parties qua raising of additional ground of appeal. As the ground raised by the Assessee goes to the root of the case and admittedly the same is legal in nature and based on the facts and documents available on record already and therefore in view of the dictum laid down by the Hon'ble Apex Court in the aforesaid judgment i.e. NTPC, we are inclined to allow the Assessee to raise the aforesaid additional ground of appeal and hence the same is allowed to be raised.\n\n11.1 As the additional ground raised by the Assessee, is legal in nature and goes to the root of the case, hence for the sake of brevity, we deem it appropriate to decide the legal ground first, in the context of the additions made.\n\n12. Coming to the addition of Rs.6,81,11,103/-, we observe that in the instant case, the search action under Section 132 of the Act was carried out in the Valuable group of cases and its associated concerns on April 10, 2013 as well as at the premises of the Assessee and therefore the case of the Assessee was re-opened by issuing a notice under Section 153A of the Act on October 26, 2013, in response to which the Assessee e-filed his return of income on December 5, 2013 declaring total income of Rs.37,81,907/- which was processed by the AO, who by considering the relevant details filed by the Assessee as called for and observing that the Assessee has derived income from salary, capital gain and other sources, ultimately vide assessment order dated March 31, 2016 under Section 143(3) read with Section 153A of the Act, made various additions including the addition of Rs.6,81,11,103/- on account of brokerage income and added the same to the total income of the Assessee by concluding as under:\n\n\"08. Brokerage of Rs.6,81,11,103/-\n\nThe Assessee, in his books of accounts has shown advance of Rs.6,81,11,103/- as advance received from M/s Valuable Infrastructure Pvt. Ltd. Vide ordersheet noting dated March 7, 2010, the assessee was asked to submit supporting evidence in respect of the same. Simultaneously, on verification during the course of assessment proceedings of M/s Valuable Properties Pvt. Ltd. it was observed that the assessee has received brokerage from M/s Valuable Properties Pvt. Ltd. of Rs.6,81,11,103/-. The said payment was made by M/s Valuable Infrastructure Pvt. Ltd. on behalf of M/s Valuable Properties Pvt. Ltd. It is thus observed that the assessee has not offered the income of brokerage of Rs.6,81,11,103/- but has shown the same in the Balance sheet as advance received. The assessee's contention that it is an advance against land cannot be accepted as it is observed that the assessee has not shown any sale of land to M/s Valuable Properties Pvt. Ltd. or M/s Valuable Infrastructure Pvt. Ltd. against the alleged advance received for land. The assessee has also not returned the alleged advance to M/s Valuable Properties Pvt. Ltd. or M/s Valuable Infrastructure Pvt. Ltd. Without prejudice to the above findings, alternatively, the same can be considered as income under Section 41(1) of the Income Tax Act, 1961. Thus, the assessee has received the brokerage income but has failed to offer the same for tax. Therefore, the brokerage income of Rs.6,81,11,103/- is added to his total income. As the assessee has furnished inaccurate particulars of income and concealed income, penalty proceedings under Section 271(1)(c) are initiated separately.\n(Addition -Rs.6,81,11,103/-)\"\n(Highlighted by us for better application)\n\n12.1 The Assessee by relying on the judgment of Hon'ble Apex Court in the case of Principal CIT, Central-3 Vs Abhisar Buildwell Private Limited reported in [2023] 149 taxmann.com399 (SC) {in short \"Abhisar case\" }, wherein it has also been laid down \"that in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961\", has submitted that as the assessment proceedings of the Assessee are unabated and the addition in hand is not based on any incriminating material found during the course of search and therefore on the basis of aforesaid judgement, the addition in hand is not sustainable.\n\n12.2 The Ld. DR. on the contrary by filing its reply to the legal ground raised by the Assessee qua aforesaid addition, has claimed that the Hon'ble Apex Court in the aforesaid judgment has also laid down \"that in case any incriminating material is found/unearthed even in case of unabated/completed assessment, the AO would assume jurisdiction to assess or reassess the total income, taking into consideration the incriminating material unearthed during the search and other material available with the AO including the income declared in the returns\" and in the instant case the addition is based on the incriminating material such as the information qua selling of lands by the Assessee, found during the course of search in the Valuable group of cases, and therefore the aforesaid ratio decidendi as laid down, is squarely applicable to the Assessee's case. In simple terms, once the AO assumes jurisdiction under Section 153A of the Act to assess the total income of the Assessee for that year during the course of assessment, he shall not only proceed to make the addition based on incriminating search material, but also can assess the total income based on other material available with him including income declared in the returns. Hence the addition of Rs.6,81,11,103/- made by the AO is squarely covered by the principles laid down by the Hon'ble Apex Court in para 14(iii) of the above judgment.\n\n13. We have heard the parties on the issue in hand and given thoughtful considerations to the peculiar facts and circumstances of the case and the relevant material available on record and the findings arrived at by the authorities below. First, we will deal with the issue raised by the Assessee in the context of decision in Abhisar case and thereafter at later stage the issue raised by Ld. DR. For better understanding and clarity, the conclusion drawn by the Hon'ble Apex Court in para 14 of the judgment in Abhisar case (supra) is reproduced herein below:\n\n\"14. In view of the above and for the reasons stated above, it is concluded as under:\n\ni) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under Section 153A;\n\nii) all pending assessments/reassessments shall stand abated;\n\niii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and\n\niv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments.\n\nMeaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under Sections 147/148 of the Act and those powers are saved.\n\nThe question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.\"\n(Highlighted and segregated by us for better understanding)\n\n13.1 The Hon'ble Apex Court in para number 14(iii) of the judgment has laid down the dictum that in case of any incriminating material is found/unearthed, even in case of unabated/completed assessment, the AO would assume the jurisdiction to assess or reassess the total income taking into consideration the incriminating material unearthed during the search and other material available with the AO including the income declared in the returns.\n\n13.2 Further in para number 14(iv) of the judgment, the Hon'ble Apex Court also laid down the dictum that in case of completed assessment/unabated assessment, no addition can be made by the AO in the absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act.\n\n13.3 Admittedly in the instant case, the assessment is unabated and it clearly appears from the opening stanza for making the addition in hand by the AO, that there is no reference of any incriminating document found during the search action carried out on April 10, 2013 but in fact the addition has been made on the following reasons/documents:\n\n\"(i) That the Assessee in his books of accounts has shown such advance of Rs.6,81,11,103/- as \"advance received from VIPL\" and\n(ii) On the basis of verification done during the course of assessment proceedings of VPPL that the Assessee has received brokerage from M/s. VPPL.\"\n\n13.4 Admittedly the Assessee in his books of account, had shown advance of Rs.6,81,11,103/- as advance received from VIPL, which resulted into making the addition, which goes to show that the addition under consideration does not emanate from any incriminating material found during the course of search and seizure operation carried out, but in fact the same is based on firstly the books of account of the Assessee, which were already available and considered by the AO while framing the original assessment order dated December 14, 2010 under Section 143(3) of the Act and secondly on the basis of verification done post search and during the course of assessment proceedings of VPPL that the Assessee has received brokerage from VPPL, therefore in view of the dictum laid down by the Hon'ble Apex Court in Abhisar case (supra), the addition in hand is unwarranted, hence the same is liable to be deleted on this score itself.\n\n14. Coming to the merits of this addition, we observe that this addition under consideration has been made by the AO on the ground that during the course of assessment proceedings of VPPL, it was observed that the Assessee has received brokerage from VPPL of Rs.6,81,11,103/- and the said payment was made by VIPL on behalf of VPPL. Thus, the AO has observed that the Assessee has not offered the income of brokerage of Rs.6,81,11,103/- but has shown the same in the balance sheet as advance receipt. The contention of the Assessee that it is an advance against lands cannot be accepted, as the Assessee has not shown any sale of land to VPPL or VIPL. The Assessee has also not returned the alleged advance to VPPL or VIPL. The AO also alternatively treated the aforesaid amount as income under Section 41(1) of the Act and ultimately by holding that the Assessee has received the brokerage income of Rs.6,81,11,103/-, added the same in the income of the Assessee.\n\n14.1 The Assessee before the Ld. Commissioner in appeal claimed that the Assessee is into the business of land/property dealing and has/is received/receiving advances from various parties and on finalizing the land deals, adjusted/adjusting the advances received. It is admitted fact that the advance received from VIPL towards land deal has been shown as advance in the balance sheet of the Assessee and VPPL during the remand proceedings confirmed the advance given for purchase of agricultural land along with ledger account statement for the period April 1, 2007 to March 31, 2015. VIPL further confirmed the advance given to the Assessee by submitting a letter dated May 24, 2019 during the assessment proceedings, in response to the notice under Section 133(6) of the Act.\n\n14.2 The Ld. Commissioner though considered the said claim/ contentions of the Assessee, however not being impressed with the same, ultimately affirmed the addition under consideration.\n\n14.3 The Assessee being aggrieved with the addition on merit, before us mainly claimed that the advance received from VIPL towards land deal, has been shown as advance in the balance sheet of the Assessee, which clearly appears from page No.110-149 of the paper book. Further, the Assessee during the remand proceedings before the AO also filed various details and submissions, which appears from remand report (page No.14-22 of the paper book). VPPL duly confirmed the advance given for purchase of agricultural land by filing confirmation letter along with the ledger account statement for the period from April 1, 2007 to March 31, 2015 and also confirmed that the amount is receivable from the Assessee, as it appears from page 18 of the paper book. It is also a fact that VIPL also confirmed the advance given to the Assessee, vide letter dated May 24, 2019 submitted to the AO during the remand proceedings in response to the notice under Section 133(6) of the Act. It is also a fact that no opportunity for cross-examination was given by the AO before making addition, thereby violating the principle of natural justice. It is also a fact that the AO held the addition as brokerage income, whereas the Ld. Commissioner affirmed the advance as receipt of unexplained income, which shows flaw in the classification of income, though the income was not taxed at special rate as specified under the Act. The Assessee is in regular course of business of land deals and it is the modus operandi of the business to take the advance from the buyer and then sell the land. This can also be inferred from the ledger account of the Assessee in the books of VPPL, wherein the advance money was given to the Assessee to buy various lands and on later dates the transactions were executed and adjusted against the advance received. Thus, the transaction was in the normal course of business and therefore cannot be treated as brokerage income. The Assessee further claimed that despite receiving the confirmation from VIPL by the AO, during the remand proceedings in response to notice under Section 133 of the Act, the Ld. Commissioner still rejected the additional evidence.\n\n14.4 The Assessee further claimed that without prejudice to the above, it is submitted that the AO alternatively treated the said amount as addition under Section 41(1) of the Act, whereas the amount has been received during the assessment year under consideration and shown as advance in the balance sheet and the same has been confirmed as receivable by VPPL in the confirmation letter and thus there has not been any remission or cessation of liability within the meaning of provision under Section 41(1) of the Act during the relevant year under consideration. Therefore, the provision of Section 41(1) of the Act, is at all not applicable in the absence of any remission or cessation of liability. The Assessee in this regard also relied on various judgments including CIT vs. Sugauli Sugar Works (P) Ltd. (1999) 236 ITR 518 (SC).\n\n14.5 On the contrary the Ld. D.R. refuted the claim of the Assessee. The Ld. D.R. vehemently submitted that the Assessee not only failed to bring on record the relevant documents qua advance received under consideration, however, also failed to justify receiving the advance, as has not placed on record any relevant material qua the property transacted and/or agreed upon and/or not materialized and therefore the addition under consideration is liable to be sustained. As the Assessee also failed to produce the relevant documents before the AO during the assessment proceedings, as filed before the Ld. Commissioner, therefore the Ld. Commissioner rightly rejected the admission of the additional evidence or documents produced before him by the Assessee.\n\n15. We have heard the parties on merits of the addition in hand. We observe that the Ld. Commissioner has not admitted the confirmation letter from VPPL regarding the payments made to the Assessee as advance for purchase of agricultural land and the ledger account of the Assessee in the books of VPPL for the period from April 1, 2007 to March 31, 2015 indicating advance of Rs.8,84,87,859/- as on May 22, 2009 and a Journal entry of Rs.6,81,11,103/- on the basis of voucher No.1436 as an amount paid to the Assessee by VIPL on April 15, 2008. The Ld. Commissioner doubted the said documents and details mainly on the reasons that the same were not made available at the time of assessment proceedings and no facts regarding the proposed deal were brought on record either during the assessment proceedings or during the appeal proceedings. Further as to why the land deal could not be materialized and that the money to the extent of Rs.8,84,87,859/-, if it is an advance, yet to be returned by the Assessee and still outstanding as on date, which makes it extremely suspect in view of both under Rule 46A and on merits and therefore the above said additional evidence of the Assessee is not accepted.\n\n15.1 We observe that in the Assessee's ledger accounts of various years including the year under consideration, it clearly depicts that receiving of advances from various perspective buyers have been shown as received/credited in the account of the Assessee, which also strengthens the modus operandi of the Assessee's business to take the advances from the buyers and then to sell the land. Receiving the advances by the Assessee from the land buyers and later on after execution of the transactions, adjusting the advances received against the land deals, appears to be a normal course of business of the Assessee. The copy of the sample sale deeds executed by the Assessee in favor of buyers also strengthens the case of the Assessee qua dealing in land/property.\n\n15.2 We further observe that in the remand proceedings, extensive investigation was carried out by the AO, wherein the VPPL by filing relevant documents confirmed the advance given to the Assessee and also confirmed the liability of the Assessee. It also clearly appears from the Assessment order and books of accounts of the Assessee, that the amount under consideration has been shown as advance received from VIPL and from the confirmation letter received from VPPL along with ledger account in the name of the Assessee for the period from April 1, 2007 to March 31, 2013 indicating outstanding advance of Rs.8,84,87,859/- as on May 22, 2009 and on the basis of a Journal entry and voucher No.1436, the amount of Rs.6,81,11,103/- has been shown as an amount paid to the Assessee by the VIPL on April 15, 2008, which also strengthens the genuineness of the claim of the Assessee.\n\n15.3 No doubt, the Assessee has failed to demonstrate the land deal in respect of this particular amount and upto the date of passing of the impugned order on September 29, 2019, the Assessee has not returned the aforesaid amount, however, it is a fact that the Assessee is in the business of land deal and has received various amounts from various prospective buyers of the land, as it clearly appears from ledger accounts of the Assessee and it is also a fact that the Assessee has also sold various lands to VPPL as it appears from the sample sale deeds produced before us by the Assessee in order to substantiate its claim. It is also a fact that on the basis of details of \"fixed assets' schedule\", the AO had observed that the Assessee has sold land of Rs.10,22,17,123/- at Vardoli and Bherle during the year under consideration and the Assessee claimed the profit of Rs.4,21,05,989/- earned from the sale of such lands, as exempt however, the AO made the alleged addition of Rs.10,42,97,083/-, which also strengthens the genuineness of the claim of the Assessee that the Assessee is into the business of land deals and therefore would has taken the advance amounts from various parties including the VPPL/VIPL and during the year under consideration, the amount of Rs.6,81,11,103/- was reflecting in the books of accounts of the Assessee, as advance received from VIPL.\n\n15.4 We further observe that the Assessee's activities in the land dealings also reflect from the impugned order at para 18, wherein the Ld. Commissioner has observed as under:\n\n\"That from the facts of the case at hand it is evident that the Assessee is a key associate of the valuable group of cases, which is involved in the business of infrastructure development. The said land parcels were acquired for a period of time from 2003 to 2005 by separate sathe Karan (POA in favour of the Assessee and sold during the year under consideration to VPPL which is one of the group concerns of the valuable group). It is a common practice that to overcome the provisions of Bombay Land Revenue Court, which prohibits purchase of agricultural land for commercial use i.e. other than agricultural purposes by business entities; and the land is first taken over through a POA by an individual from the farmers for the intervening period, when the permission for change of land used is pursued and thereafter the land is transferred from the individual to the business entity for commercial exploitation. The case of the Assessee is nothing but this only\".\n\nThe aforesaid observation of the Ld. Commissioner is also supporting the case of the Assessee that he was in the business of land dealings and therefore the probable cause for receiving the advance money from VPPL/VIPL cannot be ruled out.\n\n15.5 We further observe that where the payer confirmed by submitting the confirmation letter qua receiving the amount by the Assessee and has not given any remission/cessation of liability within the meaning of provisions of Section 41(1) of the Act, therefore the alternative treatment of the said amount by the AO is also not sustainable.\n\n15.6 We further observe that in this case, the AO treated the amount of Rs.6,81,11,103/- as brokerage income, whereas the Ld. Commissioner affirmed the same as un-explained income, which goes to show that considering the addition/income under consideration, there was no clarity between the authorities below, which also strengthens the case of Assessee qua its genuinity.\n\n15.7 The Hon'ble Apex Court in the case of Shivraj Gupta vs. Commissioner of Income Tax, Delhi 425 ITR 420 (SC)/(2020) 117 Taxmann.com 871 (SC) has considered the dictum laid down by the Hon'ble Apex Court in the case of CIT vs. Wallchand & Co. (1967)

3. SCR 214 and SA Builders Ltd. Vs. CIT (2007) 158 taxman 74/288 ITR

1. (SC) and reiterated the dictum that the Income Tax Authorities must put themselves in the shoes of the Assessee and to see how a prudent businessman would act. The Authorities must not look at the matter from their own point of view but that of a prudent businessman. Thus, on the aforesaid analyzations, we are of the considered view that this addition of Rs.6,81,11,103/- on merit as well, at all is not sustainable.\n\n15.8 Resultantly, the addition of Rs.6,81,11,103/- is deleted on legal issue in view of judgments in Abhisar case and on merit as well.\n\n16. Coming to the second addition of Rs.10,42,97,083/-, in context of the decision in Abhisar case, the Assessee has claimed that this addition is also not based on any incriminating material found during the course of search. The Assessee in its submissions dated March 17, 2016 filed before the AO stated that the lands at village Vardoli and Bherle were agricultural lands and the sale of same resulted into profit of Rs.4,21,05,989/- which is claimed as exempt.\n\n16.1 The AO though considered the claim of the Assessee, however, not found the same as acceptable and on the basis of report of Survey of India, treated the capital gains arising from the sale of lands under consideration as taxable. The AO in the absence of land purchase agreements and date of purchase, treated the entire sale consideration on sale of land as STCG and consequently added the aforesaid amount to the total income of the Assessee.\n\n16.2 The Ld. Commissioner in the impugned order treated the lands sold partly as LTCG and remaining as STCG and ultimately affirmed the addition of Rs.10,42,97,083/- to the extent of Rs.9,61,76,321/- only (Rs.4,44,48,125/-{STCG} + Rs.5,17,28,196/- {LTCG}) by treating the lands sold by the Assessee as non-agriculture.\n\n16.3 The Ld. D.R. during the hearing of this case, by filing some pages of Appraisal Report, drew our attention to para numbers 7.11, 7.11.1, 7.11.2 & 7.11.3 of the Report and submitted that in the search proceedings in the case of VPPL, it was unearthed that the VPPL has undertaken a Mega city project and on March 31, 2012 acquired certain land parcels from approximately 1200 land owners in different villages including Bherle (88 land owners) and Vardoli (306 land owners). The Ld. D.R. further submitted that the Assessee was also found to have sold the land, as it appears at srl. nos.8 and 18 of the Index of the land owners, who received sale consideration of above Rs.1,00,00,000/- qua lands sold to the VPPL. Two to three land owners, were examined by the Revenue Department, who submitted that since the land in question was agricultural land, hence the transaction does not attract capital gain tax.\n\nAs the land owners have not paid the capital gain tax but claimed the land as agricultural land and therefore to decide the issue \"whether the land acquired by VPPL is agricultural land\" and \"whether the transactions involved these sale of land attract capital gain tax or not\", the Revenue Department requested the Director of Survey of India, Maharashtra and Goa Geospatial Data Centre, Pune to verify \"whether the lands purchased falls within the jurisdiction of 8 kms from the municipal limits of Panvel Municipal Council\". The Survey of India vide report dated June 12, 2013 submitted that \"villages as listed in the report falls within 8 kms from the outer limits of Panvel Municipal Council\". M/s. Lotus Environments, Bangalore-Pune who were in a profession of land surveys and appointed by various Government Authorities for land surveys, distance, measurements and satellite based aerial map of land areas, was also asked to prepare and submit a report qua \"aerial map of proposed site acquired by VPPL from the outer margins of Panvel Municipal Council\". M/s. Lotus Environments Pune also submitted a report that on perusal of \"aerial map\" it is noted that majority of the lands purchased fall within the radius of 8 kms from the outer limits of Panvel Municipal Council. The Ld. D.R. further submitted that even two inspectors were deputed to examine the agricultural activity on the land parcels, who in their report submitted that the land parcels are barren and no sign of any agricultural activities were found. The Ld. DR at last submitted that on the aforesaid facts and documents, it is clear that the addition under consideration is based on the incriminating material found during the course of search in the case of VIPL/VPPL.\n\n17. On the contrary the Ld. A.R. refuted the claim of the Revenue.\n\n18. Heard the parties on this issue and perused the material available on record. For clarity and better understanding, we are reproducing the conclusion drawn by the AO for making this addition under consideration.\n\n\"

by Assessee in view of the dictum laid down by Hon'ble Apex Court in Abhisar Case (supra) and on merits as well and appeal of the Assessee is allowed accordingly.\n\n26. Coming to Cross Appeal, we observe that there is a delay of 592 days in filing of the same on which the Revenue Department by filing the petition for condonation for delay dated June 12, 2023 has claimed that the AO being in charge of Central Circle-1 holding the charge since mid of September 2021 and after restructuring the charges in the Income Tax Department, there were various time barring matters with respect to scrutiny assessment, judicial work, budget target, allocation and other related work. It was further submitted that the AO had a large number of assessment cases and other day to day work and therefore on the aforesaid reasons the delay in filing of the CO has been occurred unintentionally and bonafidely but not on any deliberate negligence or carelessness on the part of the Department, hence, the delay is requested to be condoned.\n\n26.1 On the contrary, the Assessee though not refuted the aforesaid claim of the Revenue Department, however, objected to the condonation of delay.\n\n26.2 Having heard the parties, we observe that the reasons stated by the AO for the delay occurred in filing the CO appears to be bonafide, inadvertent and with no malafide intention. Even otherwise in our considered view, as the appeal of the Assessee also pertains to the impugned order which has partly being challenged by the Revenue Department and the appeal of the Assessee is to be decided by us and therefore no prejudice shall be caused to the Assessee, in case the CO is also adjudicated along with the appeal of the Assessee, hence for the just decision of the case and substantial justice and fair play, the delay of 592 days in filing the instant CO by the Revenue Department is condoned, as an exceptional case under the peculiar facts and circumstances of the case.\n\n26.3 Coming to the merits of CO, we observe that the Revenue Department has raised following grounds of CO.\n\n\"1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in computing the sale consideration received from sale of lands under the head 'capital gains, without appreciating the fact that assessee is not the owner of the said lands.\n\n2. On the facts and in the circumstances of the case, the Ld. CIT(A) has failed to appreciate that the profit from impugned sale of lands of Rs.10,42,97,083/- should be computed under the head 'income from other sources.\"\n\n26.4 From the cross objections filed by the Revenue Department, it appears that the Revenue department has challenged the decision of the Ld. Commissioner in computing the sale consideration received from sale of lands under the head \"capital gains\". The grievance of the Revenue Department is that the Assessee was not owner of the said lands and therefore profit earned from the impugned sale of lands to the tune of Rs.10,42,97,083/- should be computed under the head \"income from other sources\". The grounds/issues raised by the Revenue Department by way of present CO, in fact are contrary to the determination made by the AO as well as the Ld. Commissioner, as both the authorities below considered the profits earned by the Assessee from sale of land as short-term capital gain (by the AO) and short-term capital gain & long-term capital gain (by the Ld. Commissioner). Therefore, the grounds/issues raised by the Assessee, if are allowed then the addition on account of short-term capital gain as made by the AO and partly affirmed by the Ld. Commissioner on account of short-term capital gain and long-term capital gain, would lack its foundation and automatically collapse. However, as we have deleted the additions including under consideration in the CO, hence, in order to avoid the controversy and not to make futile exercise, we are inclined not to adjudicate the grounds/issues raised in the cross objection. Even otherwise in view of our decision in Assessee's appeal, the CO has become infructuous. Accordingly, the CO filed by the Revenue Department is dismissed being infructuous.\n\n27. In the result, the appeal filed by the Assessee is allowed, whereas the CO filed by the Revenue Department is dismissed being infructuous.\n\nOrder pronounced in open court on January 23, 2025.\n\nSd/-\n(MS. PADMAVATHY S)\nACCOUNTANT MEMBER\n\nSd/-\n(NARENDER KUMAR CHOUDHRY)\nJUDICIAL MEMBER\n\nCopy to: The Appellant\nThe Respondent\nThe CIT, Concerned, Mumbai\nThe DR Concerned Bench" }, "summary": { "facts": "A search operation under Section 132 of the Income Tax Act was conducted on the assessee for AY 2008-09. The Assessing Officer (AO), in an assessment order under Section 143(3) read with Section 153A, made two significant additions: Rs.6,81,11,103/- as brokerage income and Rs.10,42,97,083/- as short-term capital gain from the sale of lands. The assessee contested these additions, claiming the first was an advance for land deals and the second related to agricultural land, exempt from capital gains. The Ld. CIT(A) largely upheld these additions.", "held": "The Tribunal deleted both additions. For the brokerage income, it held that as the assessment was unabated and no incriminating material was found during the search, the addition was unsustainable based on the Abhisar Buildwell case. On merits, the amount was recognized as an advance for land. For the capital gains addition, the Tribunal held that the lands sold were agricultural lands, situated beyond 8 km from the municipal limits (based on physical measurement and Google Maps evidence), and therefore not a capital asset under Section 2(14) of the Act. The Revenue's cross-objection was dismissed as infructuous.", "result": "Allowed", "sections": [ "2(14)", "10(37)", "41(1)", "45", "54B", "54D", "54E", "54EA", "54EB", "54F", "54G", "54H", "63", "132", "132A", "133(6)", "139(1)", "143(1)", "143(3)", "144B", "147", "148", "153A", "153C", "194H", "250", "271(1)(c)", "50C", "Rule

11. (Appellate Tribunal Rules, 1963)", "Rule 46A (Income Tax Rules 1962)" ], "issues": "

2. The classification of an amount of Rs.6,81,11,103/- as brokerage income or advance for land deals, and its taxability.

3. Whether the land sold by the assessee constitutes agricultural land, exempt from capital gains under Section 2(14)(iii), considering the method of distance measurement from municipal limits (physical vs. aerial).