NAROTTAM MANJI PATEL,RAIGAD vs. ITO WD 2, THANE

O R D E R एभ. फारगणेश, रेखा सदस्म के द्वाया / PER M. BALAGANESH, AM: This appeal of assessee is arising out of the order of the Commissioner of Income Tax (Appeals)]-2, Thane [in short CIT(A)], dated 30.05.2016. The assessment was framed by the ITO, Ward-2, Panvel (in short ITO/ AO) for the A.Y. 2011-12 vide order dated 10.03.2015 under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’). 2. The assessee has raised the following grounds of appeal:- Narottam Manji Patel; AY 11-12 ―1. The Learned CIT (Appeal), Ward -2, Thane has erred in assessing the total income of Shri Narottarn Manjibhai Patel ("the Appellant") at Rs. 2,09,98,370/- for A.Y. 2011-12.

4. The Learned CIT (Appeal) has erred in not considering the fact that the Appellant transferred the land on behalf of the Company.

6. The Learned CIT (Appeal) has erred in not considering the fact that lands were not transferred by the Appellant and no consideration has been received by the appellant, hence the said would not amount to Narottam Manji Patel; AY 11-12 transfer in the case of appellant and See 50C of the Income Tax Act, 1961 would not be applicable in the case of the Appellant. On 12th August 2005, vide special power of attorney 7. M/s RMP Infotec Private Limited (the Company) authorized the below mentioned following persons to acquire agriculture lands on behalf of the company.

Manji B Patel Laxmiben M. Patel Vanita M. Patel Narrotam M. Patel ―(Prop. Of M/s Raj System)

Due to revenue laws pertaining to acquisition of agriculture, land in India, company authorized above persons to purchase land on behalf of the company. Entire consideration towards such acquisition towards such acquisition was paid by the company. All the, agriculture land purchased by the, above mentioned persons on behalf of the company. The said lands were converted in to non —agricultural (N.A.) and all the expenses pertaining to such conversion were born entirely by the company. All the above acquisition of agriculture lands were purchased in the name of Appellant due to restriction imposed by law on acquisition' Narottam Manji Patel; AY 11-12 of agriculture land in India. There is no Question of transfer of land by Appellant as entire /lands were acquired by the 'company out of his own funds.

Further as observed in the case of income Tax Officer Vs. Navbharai Potteries (P0 Lid, It is held by ITAAT Bombay that any property purchased by the promoters for the benefit of the company gets impressed with the ownership of the company if is assets subsequently to the promoter act in the purchase.

Considering the above facts of the case and the decision of Bombay ITAT bench in the case of Income Tax Officer Vs. Navbharat Potteries (P) Ltd, we hereby state that the said sale deed executed towards non agricultural land would not be considered as transfer in the hands of' above mentioned Appellant.

Manji B. Patel Laxmiben M.Patel Vamita M. Patel Narottam M. Patel Vasant J. Kotak ―(Prop of M/s Raj System)

Due to revenue laws pertaining to acquisition of agricultural land in India, company authorized above persons to purchase land on behalf of the company. Entire consideration towards such acquisition of agricultural land was paid by the company. The company transferred funds to M/s. Raj System (Prop. Shri Vasant J Kotak) for acquisition of agriculture land on behalf of the company as mentioned in the power of attorney. All the agricultural land purchased by above 'mentioned persons on behalf of the company. The said lands were converted into Non-agricultural ("NA') and all the expenses pertaining to such conversion were borne entirely by the company.

Further, on the instructions given by the company all the N.A. lands which are mentioned above were transferred vide sale deed between our client (on behalf of the Narottam Manji Patel; AY 11-12 company) and Sakarlal Balabhai and Company Limited (" the transferee company)

Your honour in relation to above we would like to state that all the' above acquisition of agriculture lands were purchased in the name of our client due to restriction imposed by law on acquisition of agriculture land in India. There is no question of transfer of land by our client as entire land were acquired by the company out of his own funds. Further, as observed in the case of Income Tax Officer Vs. Navbharat Potteries (P) Ltd., it is held by ITAT Bombay that "promoter acquired land on behalf of the company before its incorporation and subsequently such purchase was ratified by the Board of Directors after incorporation, of the company. The said land was shown in the balance sheet of the company as belonging to it from the very beginning and assessed to wealth tax in company's hands, company was entitled to adopt cost of acquisition of the kind for purposes of capital gains ". Further it is also said that "Any property purchased by the promoter for the benefit of the company gets impressed with the ownership of the company if it assets subsequently to the promoter's act in the purchase."

Considering the above facts of the case and the decision of the Bombay ITAT Bench in the case of Income Tax Officer N. Navbharat Potteries (P). Ltd, we whereby state Narottam Manji Patel; AY 11-12 that the said sale deed executed towards non agricultural land would not be considered as transfer in the hands of our above mentioned client." ‖

5. The learned CIT(A) observed that during the course of appellate proceedings after discussion about the modus operandi of assessee’s business, the assessee has changed his above stand and accepted the fact that purchase and sale of land were done by him in his individual capacity and not on above company i.e. M/s RMP Infotech Limited as was claimed before the learned Assessing Officer. In view of these facts, the assessee has requested for withdrawal of original grounds of appeal, by raising the additional grounds before the learned Commissioner of Income Tax (Appeals). In the additional grounds, the assessee has taken two stands:- (i) land being agricultural land, hence, the sale proceeds/ gain is not taxable at all (ii) In respect of non-agricultural land, the learned Assessing Officer has taken the value of sale consideration as per section 50C of the Act on a higher side. Accordingly, the learned CIT(A) proceeded to examine and adjudicate the aforesaid two aspects raised in the additional grounds of the assessee. The assessee filed detailed written submission with regard to aforesaid aspects raised in the additional grounds before the learned CIT(A) which are reproduced in pages 7 to 10 of the order of the learned Commissioner of Income Tax (Appeals). The same are not reiterated herein for the sake of brevity. The assessee requested for reference to Departmental Valuation Officer (DVO) for determining the value of land as against the value determined in term of section 50C of the Act. We find that Narottam Manji Patel; AY 11-12 the learned CIT(A) sought a remand report from the learned Assessing Officer which was duly submitted by the learned Assessing Officer. The entire extract of the remand report was reproduced by the learned CIT(A) in Pages 13 and 14 of his order. The assessee also filed rejoinder to the said remand report on 06.05.2016 which are reproduced in pages 15 to 16 of the order of learned CIT(A).

―6. I have carefully gone through the facts of the case, findings of the Assessing Officer in the assessment order as well as remand report, submissions of the Ld AR and material placed on record. Form the above facts, it is noticed that during the year, the appellant had sold various pieces of land, as above, but did not offer any income there from, with the plea that the same were purchased on behalf of M/s RMP Infotech Pvt. Ltd. and he was not real owner of the same. It was further claimed that as per the terms of agreement between company and the appellant, the appellant had acquired various pieces of agricultural land, converted the same in to Non Agricultural land and subsequently sold the same to M/s Sakarlal Balabhai & Co. Ltd and M/s Raigad Realtors & Developers Ltd. The Assessing Officer did not accept the contention of the appellant and resorted to compute the Narottam Manji Patel; AY 11-12 capital gains, as above and added the same to the income of the appellant. During the course of appellate proceedings, the appellant withdraw the above stand, but stated that – 1) Land being agricultural land, hence the sale proceeds/ gain is not taxable and 2) In respect of NA land, the Assessing Officer has taken the value of sale consideration, for determining capital gain, as per provisions of Sec 50C of the Act, at higher side.

6.1 During the course of appellate proceedings, the Ld AR was required to establish the fact that the land under question was an agricultural land, by furnishing the details of land cultivated, crops grown, expenditures incurred for cultivation, irrigation, seeding, fertilizers, harvesting, threshing, marketing, etc, along with past history and present status. He was also required to furnish details of purchase and sales of each land i.e. date of purchase I sales, amounts of purchase and sale, nature of land, purpose for which the land purchased and - accordingly required to determine the taxable income against land dealing.

6.2 In compliance, vide order sheet noting dated 28.3.2016, the Id. AR admitted the fact that land under question was never cultivated either in the past or after purchase of land by the appellant. It is further clarified that the claim of agricultural land cannot be established Narottam Manji Patel; AY 11-12 as the appellant has never carried out any agricultural activities and have also never declared any income there - from. The appellant, however, claimed that the lands under question are situated, much beyond 8 Kms of the Municipal Limits, i.e. 30 Kms from Mahad Nagar Parishad and 35 Kms from Roha Nagar Parishad, and are agricultural land, hence, cannot be classified as an asset, as per provision of Section 2(14) of the Act. The Ld AR, however, clarified that the lands, under question, were never purchased for cultivation, but were purchased with the intention to convert the same into NA land and thereafter to sell them in small plots.