Govind Ram & Sons, Kota vs Department Of Income Tax

1 ITA No. 415/JP/2012

ITO, Ward- 1 (1), Kota vs. M/s. Govind Ram & Sons.

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 415/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2007-08

The ITO cuke M/s. Govind Ram &Sons Ward- 1(1) Vs. (HUF )E-81, Mittal Dhatu Kota Rashayan Udyog, IPIA , Kota LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAHG 4188 F vihykFkhZ@Appellant izR;FkhZ@Respondent

C.O. No.25/JP/2014 (Arising out of vk;dj vihy la-@ITA No. 415/JP/2012) fu/kZkj.k o"kZ@Assessment Year : 2007-08

M/s. Govind Ram &Sons cuke The ITO (HUF) E-81, Mittal Dhatu Vs. Ward- 1(1) Rashayan Udyog, IPIA , Kota Kota LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAHG 4188 F vihykFkhZ@Appellant izR;FkhZ@Respondent

vk;dj vihy la-@ITA No. 630/JP/2014 fu/kZkj.k o"kZ@Assessment Year : 2007-08

M/s. Govind Ram &Sons cuke The ITO (HUF)E-81, Mittal Dhatu Vs. Ward- 1(1) Rashayan Udyog, IPIA , Kota Kota LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAHG 4188 F vihykFkhZ@Appellant izR;FkhZ@Respondent 2 ITA No. 415/JP/2012

ITO, Ward- 1 (1), Kota vs. M/s. Govind Ram & Sons.

jktLo dh vksj ls@ Revenue by :Smt. Neena Jeph , JCIT -. DR fu/kZkfjrh dh vksj ls@ Assessee by : Shri Siddharth Ranka & Shri Muzaffar Iqbal (Advocate)

lquokbZ dh rkjh[k@ Date of Hearing : 18/03/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 17 /04/2015

vkns'k@ ORDER

PER R.P. TOLANI, JM

The Revenue has filed an appeal against the order of the ld. CIT(A)-

Kota dated 29-02-2012 for the assessment year 2007-08 while the assessee

filed the cross objection as well as the appeal against order of ld. CIT(A).

2.1 The solitary issue raised by the Revenue is as under:-

''On the facts and in the circumstances of the case, the ld. CIT(A) has erred in:-

(i) reducing the Long term capital gain addition of Rs. 31,12,126/- to Rs. 10,60,952/- without any valid and genuine reasons.''

3.1 The issues raised by the assessee in its C.O. as well as in appeal are

the same which are reproduced asunder. However, it may be pertinent to

mention that appeal as well as C.O. of the assessee are delayed by a period

of 863 days.

''1. That on the facts and in the circumstances of the case, the ld. CIT(A) has grossly erred in holding that out of 2.2 hectares of agricultural land sold, 0.75 hectares of land is industrial land instead of actual 100 sq. ft. Thus the ld. CIT(A) 3 ITA No. 415/JP/2012

ITO, Ward- 1 (1), Kota vs. M/s. Govind Ram & Sons.

has grossly erred in computing Long term capital gains at Rs. 10,60,952/- instead f Rs. 4,295/-

1.1 That the order of the ld. CIT(A) is unjustified and bad in law and is totally against the finding of the Hon'ble Income-tax Appellate Tribunal in the case of M/s. Chandra Prakash & Sons (HUF) and M/s. Sunil Kumar & Sons (HUF) in ITA No. 876 & 877/JP/2010 who were the other co-owners of the agricultural land.

1.2 That the capital gain has grossly erred in placing reliance on exemption obtained by the purchaser from the District Industries Centre whereas reliance ought to have been placed on the documents submitted by the assessee appellant itself.''

4.1 In this case, the assessee filed its original return of income on 12-10-

2007 declaring total income of Rs. 2,46,710/-and agricultural income of Rs.

27,89,742/- which was processed u/s 143(1) on 27-06-2008. Notice u/s 148

of the Act dated 02-02-2010 was issued on the reasons that Long term

capital gain amounting to Rs. 31,12,126/-and Short term capital gain of Rs.

7,55,905/- had escaped assessment. In compliance thereto, the assessee filed

a letter under protest to treat its regular return as return filed u/s 148 of the

Act. During the course of reassessment proceedings, the assessee raised

objections to the validity of the proceeding which were rejected by the AO

and the same is not a matter of controversy before us. 4 ITA No. 415/JP/2012

ITO, Ward- 1 (1), Kota vs. M/s. Govind Ram & Sons.

5.1 Brief facts pertaining to the controversy before us are - M/s. Govind

Ram & Sons (HUF) , M/s. Chandra Prakash & sons (HUF) and M/s. Sunil

Kumar & Sons (HUF) sold their co-ownership land land admeasuring 2.20

hectares (situated at Vill. Mandana & Tehsil Ladpura, Distt. Kota ) on 26-

06-2006 for sale consideration of Rs. 1,01,00,000/- to M/s. Earth Stone

Group, New Delhi. The Sub-Registrar adopted market value of said property

for the purpose of charging stamp duty at Rs. 1,35,62,200/- (land @ Rs.

72000/- per bigha plus other assets). Details of sold land are as under:-

Khasra No. Measurement of land Nature of land 1617 0.74 hectare Banjad 1617 0.73 hectare Banjad 1617 0.73 hectare Banjad Total 2.20 hectare

The present assessee M/s. Govind Ram & Sons received its share in the sale

consideration at Rs. 33,00,000/- on sale of the land. The assessee claimed

that above land is not capital assets as per provision of Section 2(14)(iii),

consequently the net gain receipt of Rs. 27,89,742/- was treated as capital

receipt, which is exempted from tax. A perusal of the page no. 5 of the sale

deed dated 26-06-2006 revealed that PMT registration was granted to the 5 ITA No. 415/JP/2012

ITO, Ward- 1 (1), Kota vs. M/s. Govind Ram & Sons.

assessee by Distt. Industries Centre, Kota for using the said land as industrial

land for doing manufacturing activities. On enquiries from the District

Industries Centre (DIC), Kota in the case of three HUFs, it was found that

they had applied to the DIC, Kota for granting PMT certificate for using the

said land for manufacturing of ''Wormi Compost'' fertilizers). Notary

attested affidavits dated 14-06-2004 were also filed with the DIC, Kota for

PMT registration undertaking to abide by all rules, regulation, norms, and

by all laws to set up manufacturing unit and there will be no violation of any

law to establish the unit. The AO further found that PMT certificate issued

by DIC, Kota was subject to various terms and conditions including

following

(i) The certificate is valid for the items of manufacture/ activity noted as S.No. 5 and is not valid for any other item/ activity undertaken by the unit.

(ii) The certificate is subject to the affidavit furnished by the assessee in respect of the application for registration.

(iii) The certificate is subject to any or all the conditions that may be imposed by he Registering Authority.

(iv) If at any time, it is found that the declaration/ affidavit furnished by the assessee is not true or in the event of violation of any of the conditions imposed by the registering authority or if the investment exceeds the prescribed limit. The registration certificate is liable to be cancelled/ pushed without any prior notice and legal action initiated against the unit. 6 ITA No. 415/JP/2012

ITO, Ward- 1 (1), Kota vs. M/s. Govind Ram & Sons.

(v) This certificate does not confer or accrue any right to the applicant and cannot be treated as proof in respect of any statutory requirements or condition that may exist under any law for the time being in force the onus of satisfying and fulfilling such requirements to conditions rests squarely on the applicant unit.

(vi) Additions/ deletions in the list of plant and machinery and the revised investment value thereof and /or changes in the constitution or location of the unit should be intimated to the Department in the prescribed forms.

5.2 On going through the PMT application and its enclosures it was

observed that the said land was used as industrial land in place of

agricultural land as claimed by the assessee. The said land in question was

purchased by the assessee on 26-12-2000 and sold on 26-06-2006.

Therefore, industrial land was in the possession of the assessee for more than

3 years attracting Long term capital gain on sale of such land.

5.3 Assessee submitted that:-

In this regard assessee submits that as per the Rajasthan Investment Policy, 2003 if any agriculture land is purchased for the purpose of putting up any industry then an exemption of 50% is available on Stamp Duty upon issuance of a provisional certificate to the effect to the buyer of such agricultural land by the Department of Industries. The conversion of land from agriculture to industrial unit will take place thereafter In the instant case also the buyer M/s. Earth Stone Group buys from us the agricultural land only, which is otherwise also evident on record of the Revenue Department i.e. Khasra Girdavari of being 7 ITA No. 415/JP/2012

ITO, Ward- 1 (1), Kota vs. M/s. Govind Ram & Sons.

agricultural land only, and they intend to set up some industrial unit thereon they obtained a provisional certificate to the effect so as to get 50% exemption of Stamp duty in terms of Rajasthan Investment Policy, 2003 promulgated vide Notification No. F.4(18) FD/Tax Div./2001-74 dated 28-07-2003.''

5.4 After considering the assessee's explanation, the AO held that

certificate issued by DIC, Kota clinched the issue that impugned land lost

its agricultural character and was being used for industrial and

manufacturing purposes. It was immaterial whether the land was partly or

fully used for wormy composite fertilizers. The AO also found that the land

being industrial land while executing the sale deduction, rebate @ 5% on

stamp duty was given by the Sub-Registrar, Kota on the basis of the

certificate issued by DIC, Kota which demonstrated that the land in question

was not agricultural land. AO rejected the claim of exemption as agricultural

land and worked out following additions.

Taxable Long term capital gain Rs. 31,12,126/-

Taxable Short term capital gain Rs. 7,55,905/-

Total Rs. 38,68,031/-

5.5 Aggrieved, all the co-owner assessees preferred respective appeals

and by the time, the assessee's appeal came for hearing before ld. CIT(A)

ITAT consolidated order dated 28-07-2011 on Revenue appeals in the 8 ITA No. 415/JP/2012

ITO, Ward- 1 (1), Kota vs. M/s. Govind Ram & Sons.

cases of other two co-owners i.e. M/s. Chandra Prakash & Sons (HUF) and

M/s. Sunil Kumar & Sons (HUF) were available. ITAT partly allowed

Revenue's appeals by setting aside and restoring back some of the issues by

following observations.

3.2 The facts in the case of Sunil Kumar & Sons (HUF) are the same to the facts in the case of M/s. Chandra Prakash & Sons (HUF). Hence, our findings will be the same as in the case of M/s. Chandra Prakash & Sons (HUF). There will be no capital gain on sale of land except land measuring 100 sq. ft. The short term capital gain is upheld on sale of building and trees. However, the computation is restored back on the file of the ld. CIT(A) because the ld. CIT(A) has not considered the quantum of short term capital gain which is to be included in the income because the ld. CIT(A) has held that land is agricultural. The AO in his order has referred to application filed for PMT Registration. With this application, the assessee filed certain documents. The copy of such application has not been filed by the assessee with the paper book. It is mentioned that investment in land will be Rs. 1.50 lacs. Before the AO, the assessee contended that registration was obtained for 100 to 200 sq. ft. area. It has been stated that actual use of area was 60 sq. ft. Since in the case of nature of land, we have referred to girdawari i.e. a document and the agricultural land which has been converted as industrial land to PMT registration and therefore, the land which has been mentioned in the application will have to be considered as industrial land. In the absence of relevant information, we are unable to ascertain the area of such land. The AO will ascertain the area mentioned in the application and such land area will not be considered as agricultural land and sale to that extent will be liable to long term capital gain. The Documentary evidence is to be preferred over oral evidence as per following decisions.

9 ITA No. 415/JP/2012

ITO, Ward- 1 (1), Kota vs. M/s. Govind Ram & Sons.

''The Hon'ble Bombay High Court in the case of CIT Vs. Shri Om Prakash K Jain 2009-TIOL -52-HC-

Mum held that documentary evidence must prevail over oral evidence. Statement during survey is even not an oral evidence but an information

3.3 Accordingly we have directed to accept that there was agricultural operations before sale of land and part of the land was converted into industrial use as per documents filed for the registration of PMT.

4. In the result, the appeals of the Revenue are partly allowed.''

5.6 Following this ITAT order (supra), the ld. CIT(A) granted partial

relief to this assessee by following observations.

''From the above order of Hon'ble ITAT, it ca be seen that Hon'ble Tribunal has given two findings:-

(i) The land mentioned in PMT registration was to be taken as converted into industrial land and on this land capital gain tax was leviable.

(ii) Short term capital gain on sale of other assets was t be levied.

I would like to mention that at one place the Hon'ble Tribunal had held that Long term capital gain would be levaibale only on 100 sq.ft whereas at other placed they have mentioned that land which had been mentioned in the application (PMT registration) will have to be considered as industrial land.

The decision to take 100 ft land was based on the submission that permission was taken for 100 to 200 sq.ft 10 ITA No. 415/JP/2012

ITO, Ward- 1 (1), Kota vs. M/s. Govind Ram & Sons.

whereas the actual land used for industrial purpose was only 60 sq.ft.

The Hon'ble Tribunal has itself on page 21 of its order as mentioned that documentary evidence is to be preferred over oral evidence and placed their reliance on the judgment of Hon'ble Bombay High Court in the case of CIT vs. Shri Om Prakash K Jain 2009-TIOL-52-HC-Mum. Accordingly, the undersigned is also deciding the case on the basis of documentary evidence.

On verification of certificate issued by the competent authority (copy enclosed as Annexure A), the area of land mentioned in the certificates totals to 0.75 hectares. This certificate was used by purchaser of the land for claiming exemption of stamp duty and conversion charges.

Accordingly, it is held that out of total land of 2.2 hectares, 0.75 hectares was industrial land on which Long term capital gain is leviable.

Accordingly, the taxable gain would be Rs. 10,60,952/- (Rs. 31,12,126x0.75/2.2) only.

Addition of Rs. 10,60,952/- is therefore, confirmed. The AO is directed to delete the balance addition.''

5.7 Aggrieved, the Revenue is in appeal on the relief given by the ld.

CIT(A) and the assessee seeks remedy for its belated grievance by filing the

appeal as well as C.O. which are delayed by 863 days.

5.8 The assessee has agitated its grievance that it is a coowner and while

giving effect to the above order of the ITAT the Long term capital gain 11 ITA No. 415/JP/2012

ITO, Ward- 1 (1), Kota vs. M/s. Govind Ram & Sons.

ought to have been computed an amount of Rs. 4,295/- by AO as against as

Rs. 10,60,952/- as held by the ld. CIT(A).

5.9 Ld. DR relied on the order of AO and contends that the ld. CIT(A) has

misinterpreted the order of ITAT and granted excessive relief.

5.10 Ld. counsel on the other hand contends that ld. CIT(A) has erred in

computing the capital gains at Rs. 10,60,952/-, whereas in the cases of other

co-owners it has been computed by AO only at Rs. 4,295/-; adverting to the

condonation petition filed with assessee's appeal as well as C.O., advancing

common reasons for condonation of delay which are as under:-

''1. The order passed by the ld. CIT(A) was served on 7-03-2012.

2. The counsel of the assessee was not attending to his office due to last stage cancel treatment of her mother and was away to United States of America and other parts of the country for nearly 6 months and unfortunately she left for her heavenly abode on 01-04-2012.

3. The junior of my counsel to whom the order was handed over for necessary action had also gone on leave for cancer treatment of his father.

4. That due to unfortunate situation in my counsel's family and in his office it appears that the action/ decision of filing of appeal against the order of ld. CIT(A) got lost.

12 ITA No. 415/JP/2012 ITO, Ward- 1 (1), Kota vs. M/s. Govind Ram & Sons.

5. That, we had handed over the file to Shri Siddharth Ranka, Advocate on 12th Sept. 2014 to appear before the Hon'ble ITAT, Jaipur Bench with regard to appeal filed by the Revenue Department and who immediately apprised us of the legal situation and accordingly without loss of time we are now filing the cross objections/ cross appeal against the departmental appeal.''

5.11 The ld. Counsel for the assessee contends that the delay in filing the

assesses appeal & CO was occasioned by the reasons beyond its control.

Therefore, there exists reasonable and sufficient cause for condonation of

delay in filing them belatedly. Reliance is place in the case of Collector,

Land Acquisition vs. Mst. Katji and Others, 167 ITR 471 (SC) for the

proposition that when technical considerations and cause of substantial

justice are pitted against; the cause of substantial justice should be preferred.

5.12 The ld. DR on the other hand vehemently opposed the inordinate

delay of 863 days in filing the appeal and C.O. by the assessee; the reasons

given are afterthought and lack specific details. Therefore day to day delay is

not reasonably explained. It is pleaded that if such type of inordinate delay is

condoned on such generalized pleadings then no litigation will attain

finality. Besides the assessee has been indolent in pursuing the legal

remedies in as much as the order giving effect in the case of other two co-

owners was passed by the AO on 18-10-2011 whereas the impugned ld. 13 ITA No. 415/JP/2012

ITO, Ward- 1 (1), Kota vs. M/s. Govind Ram & Sons.

CIT(A)'s order was passed on 29-02-2012 i.e. after more than four months.

The assessee appeared before the ld. CIT(A) and no difficult circumstances

are pleaded to exist at the time of hearing of its appeal before the ld. CIT(A).

Thus the assessee failed to make proper representation before the ld. CIT(A)

and the assessee was recalcitrant in pursuing the legal remedies for which

premium cannot be given by law. Therefore, the delay should not be

condoned.

5.13 The ld. Counsel for the assessee in the rejoinder contends that non-

allowing of condonation will result into a serious anomaly and injustice

inasmuch as by the same order of ITAT, the two co-owners will be assessed

to capital gain only to Rs. 4,295/- whereas the assessee will be taxed at Rs.

10,60,952/-. This amounts to miscarriage of justice which deserves to be

addressed in the interest of substantial justice.

5.14 We have heard the rival contentions and perused the materials

available on record. The ld. CIT(A) while passing the impugned order has

relied on the ITAT order in the case of other two co-owners and held that the

assessee is liable to capital gain of Rs. 10,60,952/-. It appears that the ld.

CIT(A) had no occasion to consider the order giving effect to ITAT order in

the case of other two co-owners. Besides we find merit in the arguments of 14 ITA No. 415/JP/2012

ITO, Ward- 1 (1), Kota vs. M/s. Govind Ram & Sons.

the ld. Counsel for the assessee that the order of the ld. CIT(A) and AOs

order giving effect to ITAT order on the same subject matter in two other

co-owners has led to an anomalous situation.

5.15 In the entirety of facts and circumstances as narrated above, we are

left with no other choice except to set the aside the order of the ld. CIT(A) to

decide the same afresh by considering the ITAT order carefully and the AOs

orders giving the effect to ITAT order in the cases of other two co-owners;

this will impliedly include the consideration of assessee's grievances. Thus

the appeal of the Revenue is allowed for statistical purposes , this way the

grievance raised by the assessee of leaving it in an anomalous situation will

be automatically addressed by the ld. CIT(A) in accordance with law, while

deciding the appeal denovo.

5.16 Apropos the condonation petitions, we are unable to hold that the

assessee was prevented by sufficient cause in filing the appeal by 863 days

as the order giving effect of ITAT order was passed by the AO on 18-10-

2011 whereas the impugned ld. CIT(A)'s order was passed on 29-09-2012

which was well represented by the assessee. Under these circumstances,

finding merit in the contentions of ld. DR, we dismiss the condonation

petitions. Thus the appeal and the C.O. of the assessee are dismissed as non 15 ITA No. 415/JP/2012

ITO, Ward- 1 (1), Kota vs. M/s. Govind Ram & Sons.

maintainable being barred by limitation. We have directed that assessee's

grievances will be automatically taken care of by the ld. CIT(A) while

deciding the appeal by the ld. CIT(A) de novo. Needless to say that assessee

will be given adequate opportunity of being heard.

6.0 In the result, the appeal of the Revenue is allowed for statistical

purposes and the appeal as well as C.O. filed by the assessee are dismissed.

Order pronounced in the open court on 17/04/2015.

Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 17th APRIL, 2015

*Mishra

vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- The ITO, Ward- 1 (1), Kota

2. izR;FkhZ@ The Respondent- M/s. Govind Ram & Sons, Kota

3. vk;dj vk;qDr¼vihy ) @ CIT(A),

4. vk;dj vk;qDr@ CIT,

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No.415/JP/2012)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@ Assistant. Registrar