Income Tax Appellate Tribunal - Chennai
Chaganlal Lalji Aswin, Coimbatore vs Department Of Income Tax on 18 October, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH, CHENNAI
BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND
SHRI GEORGE MATHAN, JUDICIAL MEMBER
I.T.A. No. 857/Mds/2011
(Assessment Year : 2007-08)
The Income-tax Officer Vs. Shri Chaganlal Lalji Aswin
Business Ward III(3) New No. 12, Old No. 65
63, Race Course Road Syrian Church Road No. 3
Coimbatore Coimbatore - 641 001
PAN No. ACLPA 5362 L
(Respondent)
(Appellant)
Assessee by : Shri K. Raghu, FCA
Department by : Shri Shaji P. Jacob, Sr. DR.
Date of Hearing : 18.10.2011
Date of Pronouncement :
O R D E R
PER N.S. SAINI, ACCOUNTANT MEMBER :
This is an appeal filed by department for the assessment year 2007-08 against the order dated 28.02.2011 of Commissioner of Income Tax [A]-I, Coimbatore.
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2. The Revenue has raised the following grounds:
1. The order of the learned Commissioner of Income Tax (Appeals) is against facts and circumstances of the case.
2. The learned CIT(A) ought to have considered that the land is located within the distance of 8 kms from the limits of Coimbatore Corporation, the population of which exceeds 10000 Nos.
3. The learned CIT(A) ought to have considered that the stated issue of population of the village (Sarkar Samakulam) in which the land-in-question is situated being less than 10000 as per the Census 2001 is neither relevant or tenable; for, the population of Coimbatore Corporation is above 10000 Nos.
4. The learned CIT(A) ought to have considered the judgement in the case of G.M. Omerkhan Vs. CIT (1992) 196 ITR 269 (SC) wherein it has been clearly held, in the said decision, that not the village in which the agricultural land is situated is to be considered but, the jurisdictional municipality, for testing the nature of such land as to whether a capital asset or not.
5. The learned CIT(A) erred in overlooking the report of the assessing officer and deleting the addition made by him.
6. The learned CIT(A) ought to have observed that the land in question constitutes capital asset within the meaning of section 2(14)(iii)(b) of the Act in as much as the land is situated within the distance of 8 Kms from the Corporation limits.3 I.T.A. No. 857/Mds/2011
7. The learned CIT(A) ought to have observed that when the full value of sale consideration amounted to Rs.1,82,49,000/- no prudent man would utilize the land for any agricultural purposes.
8. The learned CIT(A) erred in not considering that the assessee could not produce any evidence for expenses such as sales commission and other charges etc. amounting to Rs.17,38,000/-.
9. The learned CIT(A) ought to have considered the various findings given by the assessing officer in favour of revenue, in his assessment order.
10. The learned CIT(A) ought to have considered that the land in question was transferred to a builder-promoter-
company of real estates. As such the intention of the assessee was not to utilize the land for any agricultural purposes as stated by him."
3. As the facts and issue involved in all the grounds of appeal are common, they are being disposed of together as under.
4. The brief facts of the case are that the assessee, an individual, filed Return of Income for Assessment Year 2007-08 on 30.3.2009 admitting total income of Rs. 86,470/-. The return was processed u/s 143(1) of the Income-tax Act, 1961 and subsequently taken up of scrutiny. The assessment was completed u/s 143(3) of 4 I.T.A. No. 857/Mds/2011 the Act by raising a short term capital gain of Rs. 1,62,74,232/- on sale of land.
5. Aggrieved by the said order, the assessee filed appeal before the ld. CIT(A) challenging the addition of Rs. 1,62,74,232/- by treating the sale of agricultural land as claimed by the assessee to be capital asset u/s 2(14)(iii)(b) of the Act on the ground that it was within the distance of 8 kms from Municipal limits and thereby levying short term capital gains tax on the same.
6. On appeal before the ld. CIT(A), the assessee submitted as under:
"The appellant had sold an area of 4.345 acres of agricultural land which was situated after 8 kms., from the local limits of the Coimbatore municipality. This space on the surface should be situated within 8 kms., from the outer limits of the municipality in order to be capital asset with reference to the agricultural land under section 2 (14)(iii)(b). In the course of the assessment proceedings the appellant accompanied the Assessing Officer to prove that the area of the agricultural land was lying at a distance of more than 8 5 I.T.A. No. 857/Mds/2011 kms., from the local limits of the Coimbatore municipality. The appellant also filed a certificate from an Approved Chartered Engineer that the agricultural land bearing SF No.589-181 and 182 in Sarkar Samakulam village is located at a distance of 9 kms:, from the end of corporation limit of Coimbatore on Ganapathy Manager. The distance from corporation limit on Vilankurichi Road was 9.7 kms., and from corporation limit on Avanashi Road was 9.7 kms. The distance was still longer at 11.3 kms., from the end of corporation limit on Ganapathy - Sathy Road.
At paragraph 8, the AO has stated that the distance from the municipal corporation limit starting from Vilankurichi Road:
up to the point of the land was measured and the distance is
7.6 kms., within a radius of about 5 kms., only. Moreover, there was a pucca road which joins the above property with the main stream. The appellant objects to this finding of the AO because it is contrary to the facts. Firstly, the AO has not specified the exact S.F. Number of the land which was found at a distance of 7.6 kms., to contradict the distance as proved by the appellant accompanying him at the time of inspection and also certified by the approved Valuer at 9 kms., from the corporation limit on the Vilankurichi Road to the area of land in S. F. No.589-181 & 182 in question. Secondly, the pucca road ending at a distance of 7.6 kms., is not ending at 6 I.T.A. No. 857/Mds/2011 S.F.No.589-181 & 182 and it is not situated at the end of 7.6 kms., but situated farther away well beyond 8 kms. Sarkar Samakulam village admittedly is not a village referred to under Section 2(14)(iii)(b). The AO with a closed mind concluded that the agricultural land in question was a capital asset under Section 2(14)(iii)(b); The AO did not confront the appellant on the spot with his finding that the precise distance of the agricultural land in question was 7.6 kms and not beyond 8 kms., as contended by the appellant at any point in time and it was through the order passed by the AO that the appellant came to know that the AO did not agree with his stand on the distance of the land owned by the appellant and sold by him. Surprisingly, the AO has not rejected the certificate of the Chartered Engineer from different point certifying the distance is more than 8 kms. Nowhere, the law requires the distance to be determined on the basis of radius.
The AO has ignored the reckoning of urbanization as the factor prescribing the distances is of significance, which would yield to the principle of measuring distance in terms of approach road rather than by straight line on horizontal plan. The village may commence from a distance of 7.6 kms., 'but if the area of land in question is though situated in the village at a 7 I.T.A. No. 857/Mds/2011 distance of more than 8 kms., from municipal limit, it will fall outside the scope of capital asset within the meaning of section 2(14)(iii)(b). The Assessing Officer obviously being conscious of fact has chosen to ignore the specified survey number of the area of the land situated at a distance of more than8 kms."
7. The ld. CIT(A), after considering the submissions held as under:
"7. I have gone through the submissions made by the appellant and, also the order of the Assessing Officer. As seen from records, my predecessor has written a letter to the Income-tax Officer, Ward-III(3),Coimbatore on 11.6.2010, directing the AO to make a reference to municipal authorities and obtain a certificate about the actual distance from the corporation limit to the land in question at the shortest route by proper road connectivity. Regarding the nature of the land, the AO was directed to refer the matter to the Tahsildar of the area to decide the nature of the land as per the land records maintained in the Tahsildar Office. Again a letter was addressed by the CIT(A) on 17.6.2010 to the appellant referring to the AO's order at page 5 para 12. In this letter, the appellant was asked to certify regarding the receipt of advance of Rs.1 crore from the prospective 8 I.T.A. No. 857/Mds/2011 buyer of the land in question before the same was conveyed in appellant's favour by way of registered sale deed. The CIT(A) has also asked the appellant to clarify regarding the nature of transactions having the characteristic of an adventure in the nature of trade. In reply to the observations of the CIT(A), the appellant vide his letter dated 16.7.2010 submitted that the statement of the AO referred to by the CIT(A), does not state the facts correctly. The appellant explained as under:
.
The statement of the AO that the assessee has received an advance of Rs.1 crore from the purchaser i.e., the property developer on 9.9.2006 itself, but purchased the property only on 11.9.2006 is an incorrect statement of facts. Shri Aswin stated that he has not received any advance from the purchaser on 9.9.2006. The entire sale consideration of Rs.1,82,49,OOO/- was received by DD only at the time of execution and the registration of the document of sale by the appellant's power of attorney Shri D. Rathinasamy. The investment in land was made by the appellant only out of his own funds only and it was never made with an intention to trade in that said land. Shri Aswin submitted that he being practicing CA., did not have any Intention doing real estate business. He invested in this property with a view to carrying on agricultural operations on the said land. However, during one of his visits to the land, after he became the owner, he 9 I.T.A. No. 857/Mds/2011 was approached by the purchaser's representative quoting a beneficial price. Taking into consideration, the suggestion of the family members, he thought it fit to sell the land because of the beneficial price and thought it would be useful for his daughter's education and marriage since she was 20 years old. He submitted that he had no intention at all at the time of investment to sell the land but however, the offer from the purchaser was so tempting that he accepted 'the offer and sold the land. The AO has made incorrect facts as a part of his order that the assessee received a sum of Rs. l crore from the purchaser on a date earlier to purchase. The appellant submitted that he had no personal/professional relationship with the buyer and he was a stranger to him, as much as he was to him.
If the allegation of the Assessing Officer is correct, the appellant submitted that he should not have been liable· to the assessment, as 'any income would have accrued, in the assessment of the person who had held the land before 11.9.2006, having held the land for agricultural purposes for a longer stretch of years. The appellant submitted that the asset sold by him was not a capital asset being located beyond the prescribed limits as defined and further there was no intention of 10 I.T.A. No. 857/Mds/2011 any real estate business to treat it as adventure in the nature of trade.
8. The Assessing Officer vide his, letter dated 16.9.2010 submitted that the appellant's case was referred to the Divisional' Engineer, Highways Department, Coimbatore and a certificate about the actual distance from the corporation limit to the land in S.F.No.589/1 of Sarkar Samakulam village; in question at the shortest route by proper road connectivity. As seen from the letter from the D.E., Shri K. Vellingiri of Highways Department, the distance was arrived at 8.112 kms., from the Coimbatore corporation limit to the land S.F.No.589/1 of Sarkar Samakulam village. The details are as follows:
1. Salem Cochin Road to Vilankurichi Road Km. 2.612
2. Panchayat Union Road Km 0/0 2.629
3. Dindugal Bangalore Road NH 209 Km 172/8 - 0.391
4. Panchayat Road Km 0/0 1/2 , 1.218
5. Sitra Kurumbapalayam Road Km 0.462
6. Earthern Road (Cart track) 0.800 Total length 8.112
9. Similarly, the Assessing Officer also submitted a certificate issued by the Tahsildar [north] dated 26.7.2010 that during the year 2004-05, S. F. No. 589-1B1 and 1B2 are under cultivation of 11 I.T.A. No. 857/Mds/2011 Maize and Toor Dhal. Further to his submission, the appellant vide letter dated 13.10.2010 submitted that the credit on, 9.9:2006 into his Savings Bank account in respect of the banker's cheques on ICICI Bank dated 08.09.2006 for Rs.45 lakhs and Rs.55 lakhs was the amount received from Shri S. Martin of Coimbatore. The appellant submitted confirmation letter of Shri Martin regarding the loan amount of Rs. 1 crore given to him vide ICICI bank cheques of Rs. 45 lakhs and Rs. 55 Iakhs. This proves that the observation of the Assessing Officer 'that the assessee has received an advance of Rs. 1 crore from the purchaser on 9.9.2006 Is far from facts.
10. Further, regarding the sale consideration of Rs. 1,82,49,000/~ received on behalf of the appellant by his power agent, the details were furnished. The appellant furnished his bank account along with the bank accounts of his family members regarding the transactions. As seen from the details of his earlier Income-tax returns, the appellant was not in the habit of purchasing and selling of lands. This appears to be an isolated transaction in which 12 I.T.A. No. 857/Mds/2011 he has purchased said land on 11.9.2006 and sold the land on 22.12.2006. However, taking into consideration, the dispute regarding the distance of the land situated at S.F. No.589-1B1 & 1B2 in Sarkar Samakulam village, from the municipal limits of Coimbatore, I personally visited the property in question to record the facts. I was accompanied by my Stenographer Shri R. Vasudevan and the appellant Shri Aswin. The shortest distance as suggested by the Assessing Officer and the National Highways Authority report was taken and from the outer city limits of Coimbatore the distance up to the point of proximity to the land situated at S.F.No.589-1B1 & 1B2 was 8.1 kms. The property as shown by the appellant was still ahead by about 300 metres from the motorable road. As seen from the location, there was no approach road to the property in question. The route taken is Vilankurichi Road - Vinayagapuram via Valliampalayam village. This is also the route taken by the Assessing Officer on which he had arrived at a distance of 7.6 kms. The straight route from the outer limits of the Panchayat was taken even though some stretch of road is very narrow. Since the property in question is situated 13 I.T.A. No. 857/Mds/2011 more than 8 kms. from the outer limits of Coimbatore Corporation, it cannot be treated as a capital asset u/s 2(14)(iii)(b) of the Income-tax Act, 1961. In view of this, the Assessing Officer is directed to delete the addition made. The grounds of appeal are allowed."
8. The ld. D.R. relied on the order of the Assessing Officer whereas the ld. A.R. of the assessee relied on the order of the ld. CIT(A).
9. We have heard the rival submissions and perused the orders of the lower authorities and the material available on record. In the instant case, the profit on sale of agricultural land of Rs. 1,62,74,232/- was assessed by the Assessing Officer under the head 'short term capital gains' for the reason that agricultural land in question was situated within 8 kms of the municipal limits of Coimbatore municipality.
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10. In appeal, the ld. CIT(A) called for remand report from the Assessing Officer in view of the assessee's contention that land was beyond 8 kms of municipal limits of Coimbatore municipality on the basis of registered valuer's report. In the remand report, the Assessing Officer submitted that as per the report received by him from the Divisional Engineer, Highways Department, Coimbatore, the agricultural land in question was 8.112 kms away from the municipal limits of Coimbatore municipality. In view of this, the ld. CIT(A) deleted the addition by observing that agricultural land in question was not a capital asset. Before us, the ld. D.R. could not point out any error in the order of the ld. CIT(A). In the absence of any material brought before us to show that agricultural land in question was a capital asset within the meaning of section 2(14) of the Act, we do not find any good reason to interfere with the order of the ld. CIT(A). It is confirmed. Ground of appeal of the department is dismissed.
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11. In the result, the appeal of the Revenue is dismissed. Order pronounced in the court on 21st October, 2011.
Sd/- Sd/-
(George Mathan) (N.S. Saini)
Judicial Member Accountant Member
Chennai,
Dated the 21st October, 2011.
VL Copy to: (1) Appellant
(2) Respondent
(3) CIT(A), Chennai
(4) CIT, Chennai
(5) D.R.
(6) Guard file