Satinder Kumar , Sonepat vs Department Of Income Tax

Income Tax Officer, vsShri Satinder Kumar, Ward-3, Sonepat. H.No.171, Sector-14, Sonepat. (PAN: ALMPK0349K) (Appellant) (Respondent) Appellant by: Shri B.R.R. Kumar Sr. DR Respondent by: S/Shri Gautam Jain, Adv. & Piyush Kumar, Adv.

ORDER

PER CHANDRA MOHAN GARG, JUDICIAL MEMBER

This appeal by the revenue has been directed against the order of the

CIT(A), Rohtak dated 1.5.2013 in Appeal No. 547/RTK/12-13 for AY 2011-12.

The grounds raised by the revenue read as under:-

" 1. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in law and in facts in deleting the addition of Rs. 21,44,399/- made by the A.O. by rejecting the books of account and estimating the net profit @ 5% of the turnover as the assessee failed to produce any relevant details of opening and closing stock and also any sustainable evidence in support of the entries contained in the books of account.

2. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in law and in facts in deleting the addition of

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Rs. 6,41,287/- made by the A.O. on account of Capital Gain' on the sale of truck as the assessee could not produce any sustainable documentary evidence in respect of purchase/sale of truck during assessment proceedings.

3. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in law and in facts in deleting the addition of Rs. 11,54,243/- made by the A.O. by withdrawing the exemption claimed by the assessee u/s 10(37) of the Income-tax Act, 1961 as the assessee could not produce any sustainable documentary evidence in support of his claim during assessment proceedings.

Ground No. 1 2. Apropos ground no.1, ld. DR submitted that the CIT(A) has erred in law

and facts in deleting the addition made by the AO by rejecting the books of

accounts of the assessee and estimating the net profit @5% of the turnover as

the assessee failed to produce any relevant details of opening and closing stock

and also any sustainable evidence in support of the entries contained in the

books of accounts. Replying to the above, ld. Counsel of the assessee supported

the impugned order and submitted that the AO rejected the books of accounts of

the assessee without any good and reasonable cause as the assessee was

maintaining regular books of accounts which were duly audited by the statutory

auditors. Ld. Counsel pointed out that no defects or discrepancies were noted

by the AO in the books of accounts submitted before him and the AO resorted

to rejection of books of accounts only on the ground that the relevant details of

opening and closing stock have not been furnished. Ld. Counsel has drawn our

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attention towards paper book page no. 40 to 47 and submitted that detail of

stock statement along with opening statement as on 1.4.2009 and closing stock

as on 31.3.2010 were submitted before the AO which were totally ignored while

rejecting the books of accounts of the assessee. Ld. DR has not disputed this

fact that the details filed at page 40 to 47 of the Paper book of the assessee were

very well before the AO during assessment proceedings. This fact has also been

noted by the CIT(A) in para 5 of the impugned order while demolishing the

conclusion of the AO on rejection of books of accounts.

3. From operative part in para 5 at page 3 of the impugned order, we further

observe that the CIT(A) rightly held that the rejection of books of accounts by

the AO was not sustainable and the action of the AO in estimating the net profit

at 5% as per section 44AF of the Income Tax Act, 1961 (for short the Act) was

misplaced and misconceived as this provision relates to retail business having

turnover of less than Rs.40 lakh per annum. The CIT(A) also noted that the

estimation of profit at 5% of total turnover is not in the line of GP declared by

the assessee in AY 2007-08 of 0.72% and in AY 2009-10 of 1.71% of the total

turnover. Therefore, we are unable to see any valid reason to interfere with the

impugned order on this issue and we uphold the same. Finally, ground no. 1 of

the revenue being devoid of merits is dismissed.

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Ground No.2

4. Apropos ground no.2, ld. DR submitted that the CIT(A) has erred in law

and in facts in deleting the addition of Rs. 6,41,287/- made by the A.O. on

account of Capital Gain' on the sale of truck as the assessee could not produce

any sustainable documentary evidence in respect of purchase/sale of truck

during assessment proceedings. Supporting the assessment order, ld. DR

pointed out that in para 3 of the assessment order, the AO rightly held that the

claim of purchase of truck has been made by the assessee for the sole purpose

of circumventing payment of tax on capital gain on sale of the only truck in his

inventory of fixed assets. Ld. DR vehemently contended that the claim of

purchase of truck was baseless, frivolous as the payment of said purchase was

made in cash on 20.8.2009 amounting to Rs.7,05,000 and during more than 8

months of the relevant financial year, the assessee did not get it transferred and

registered in his name, therefore, said transaction of purchase of truck is a sham

transaction which was rightly rejected by the AO. Ld. DR vehemently

contended that the CIT(A) deleted the addition without any sustainable reason

and by wrongly mentioning that the AO has not disputed the price paid for the

truck. Ld. DR also contended that the reasons recorded by the AO for rejecting

the claim of purchase of truck are sustainable and hence, impugned order may

be set aside by restoring that of the AO on this issue.

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5. Ld. Counsel of the assessee supported the impugned order and submitted

that the claim of purchase of truck cannot be rejected at the threshold merely on

the basis that the payment has been made in cash and the said purchased vehicle

could not be transferred and registered in the name of assessee. Ld. Counsel

further submitted that as the truck was purchased from the concern in which the

assessee had beneficial interest, therefore, it was not considered necessary to get

it transferred in the name of the assessee immediately after purchase and merely

because the truck was purchased from the concern in which the assessee is

interested cannot fortify the conclusion that the transaction is suspicious or

doubtful. The ld. Counsel also pointed out that the AO has allowed depreciation

on the truck, hence, its purchase canto be held as suspicious or bogus.

6. On careful consideration of above submissions, at the very outset, we note

that the CIT(A) has granted relief for the assessee with following conclusion:-

"7. I have considered the issue and the submissions made by the AR. It is not in dispute that the sale of truck has been recorded in the books of accounts of M/s Haryana Logistics, which is assessed to tax separately. As per the cash receipt, the possession of the truck has been handed over to the assessee on 20.08.2009 itself. Merely because the truck was purchased from a concern in which the assessee has beneficial interest cannot lead to the conclusion that the transaction is suspicious. It is worthwhile to note that the AO has not disputed the price paid for the truck. One of the reasons given by the AO of cash receipt having not been witnessed by any person is devoid of any merit, as no such stipulation /regulation exists.

It is well settled law that change of name In the RC is not compulsory/ mandatory for claiming beneficial ownership and depreciation thereon. Further, the assessee has shown the freight 5 ITA 4415/Del/2013 Asstt. Year: 2010-11

receipt on the truck purchased and the corresponding expenditure.

In view of the above, the addition made by the AO is deleted and the ground of appeal is allowed."

7. In view of above, we note that the only documents submitted by the

assessee to support the claim of purchase of truck is available at page 48 of the

Paper Book which is a cash receipt dated 20.8.2009 of Rs.7,05,000. On this

cash receipt, there is signature of seller Mohinder and the column of the witness

is blank. No other document supporting the transaction of purchase of Truck

No. HR69/6516 has been submitted before us. Even we are unable to see any

document to show that the said truck was originally registered in the name of

Mohinder who has signed on the cash receipt as seller. On the specific query

from the Bench, ld. Counsel of the assessee could not assist us why the payment

was made in cash and what was the reason for not getting transferred and

registered the purchased truck in the name of assessee even after a lapse of more

than 8 months during the financial year under consideration. Ld. counsel

during the argument has strenuously pointed out that the AO has allowed the

claim of depreciation of Rs.19,114 on the purchased truck, therefore, the

transaction of purchase cannot be disputed by the AO. Ld. Counsel pointed out

page no. 13 of the paper book and submitted that in the trading and profit and

loss account for the year ending on 31.3.2001, the assessee made a claim of

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depreciation on the purchased truck which was allowed by the AO and in this

situation, the AO cannot deny the transaction.

8. On careful consideration of above, we are of the view that the purchase of

truck cannot be held as suspicious or bogus only because the truck has been

purchased in cash from the concern wherein the assessee is beneficiary and only

because the registration was not transferred in the name of the assessee

purchaser. At the same time, we are also of the view that the transaction of

purchase of truck cannot be accepted blindly merely because the AO has

allowed depreciation for the assessee on an entry made in the P&L account.

Main question is that whether the truck was purchased and used by the assessee

for the purpose of his business and answer to this question can be gathered only

when the issues of fuel, drivers and cleaners salary and other wear and tear

expenses on the truck after purchase i.e. after 20.8.2009 is examined and

verified at the end of the AO.

9. The issue of registered owner prior to purchase and subsequent to

purchase is also relevant to proper determination and evaluation of transaction

of purchase of truck which also requires verification and examination at the end

of the AO. Thus, we find it just and proper to restore this issue to the file of the

AO for proper examination and verification in the light of aforesaid observations

after affording due opportunity of hearing for the assessee and without being

prejudiced by earlier assessment and impugned order and our observations in

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this order. Accordingly, ground no. 2 of the revenue is deemed to be allowed

for statistical purposes in the manner as indicated above.

Ground No.3

10. Apropos ground no. 3, ld. DR submitted that CIT(A) has erred in law and

in facts in deleting the addition of Rs. 11,54,243/- made by the A.O. by

withdrawing the exemption claimed by the assessee u/s 10(37) of the Income-

tax Act, 1961 as the assessee could not produce any sustainable documentary

evidence in support of his claim during assessment proceedings.

11. Ld. DR supporting the assessment order submitted that the assessee

received impugned amount during the assessment year under consideration on

account of further enhanced compensation on compulsory acquisition of his

agricultural land in Village Jamalpur Khurd, Sonepat. Ld. DR further submitted

that the said agricultural land is a capital asset within the meaning of section

2(14)(iii) of the Act which was acquired and possession was taken over by

HUDA on 28.3.1990 and the whole consequent original compensation was

received by the assessee much earlier than previous year relevant to AY 2005-

06, therefore, exemption available u/s 10(37) of the Act inserted w.e.f. 1.4.2005

of the Act cannot be allowed to the assessee in respect of further enhanced

compensation pertaining to the same land.

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12. Replying to the above, ld. counsel of the assessee supported the impugned

order and submitted a copy of the judgment of ITAT, Chandigarh 'B' Bench in

the case of Chura Ram vs ITO (2011) 10 taxmann.com 34 (Chd.) and submitted

that it is not in dispute that the assessee had received enhanced compensation

during the year under consideration after 1.4.2005, therefore, the enhanced

compensation in respect of compulsorily acquired agricultural land is exempted

u/s 10(37) of the Act.

13. On careful consideration of above submissions, we note that ITAT

Chandigarh in the case of Chura Ram vs ITO (supra) has held as under:-

"8. On this aspect we have carefully considered the rival submissions and perused the impugned orders of the authorities below. Firstly, it is to be observed that the use of the land for agricultural purposes has to be seen during the period of two years immediately preceding "the date of transfer" as required by section 10(3 7)(ii) of the Act and not the date of acquisition, as canvassed by the revenue. It is to be appreciated that in order to charge tax on Capital Gains accruing on a property acquired under the Land Acquisition Act, 1894 the date of transfer has to be reckoned in terms of section 16 of the Land Acquisition Act, 1894. Where a property is acquired under the Land Acquisition Act, 1894 the title to the lands vests in the Government under section 16 of the said Act on taking of possession of land by the Land Acquisition Collector in pursuance to the Award. The above proposition is supported by the judgment of the Hon'ble Karnataka High Court in the case of Buddaiah v. CIT [1985] 155 ITR 277. In this connection, we have perused the Awards rendered by the Land Acquisition Collector, Panchkula on 1-10-1999 and 10-12-2002. In terms of the stated Awards, the possession has been taken over immediately and therefore, the title vested in the Government in terms of section 16 of the Land Acquisition Act, 1894 from the said dates. Accordingly, for the purposes of charging capital

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gains, the date of transfer corresponds to the dates of the two Awards. Therefore, for the purposes of section 10(37)(ii) of the Act, the date of transfer is to be taken as the dates of the Awards. Now, in order to examine the condition prescribed in clause (ii) of section 10(37), it has to be established that during the period of two years immediately preceding such dates of transfer, the land was being used for agricultural purposes by the assessee or a parent of his. The plea of the assessee for agricultural use of land is based on copies of Khasra Girdawri which clearly shows growing of crops in the relevant period. The objections of the Department that the agricultural use is not proved because of the non- mentioning of crops in the Award' given by the Land Acquisition Collector, Panchkula, in our view, is a mere presumption which does not distract from the evidentiary value of the Khasra Girdawri produced by the' assessee. Even the mentioning of Gair Mumkin in the Khasra Girdawri cannot be construed as fatal to the contents of Kharsa Girdawri, which reveal the growing of crops, thus proving the agricultural use of the land. On this aspect the Id. Counsel explained that the land was self-irrigated.

9. On this aspect, a reference to the judgment of the Hon'ble jurisdictional High Court in the case of CIT v. Smt. Savita Rani [2004] 270 ITR 402(Punj. & Har.) is note worthy. The Hon'ble High Court, in the context of section 54B of the Act was examining whether the land can be said to have been used for agricultural purposes. The Department had sought to hold that the land was not being used for agricultural purposes because the land was said to be situated within the municipal limits; that only fodder grass and vegetables were grown in the kharif season while the land remained fallow in the rabi season; and, that assessee had acquired huge chunks of land and constructed certain godowns also. All these objections were not held as conclusive in the face of the khasra girdawri of the land produced by the assessee. As per the Hon 'ble High Court, khasra girdawri produced by the assessee showed that agricultural operations were being carried on by the assessee and merely because the land was located in a commercial area or land was having partial utilization for non-agricultural purposes were not the relevant considerations. Even in the case before us, khasra girdawri produced by the assessee clearly shows that during the period of two years immediately preceding the date of transfer, the land was being put to use for

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agriculture purposes. The khasra girdawri, placed at pages 8-9 and 14-15 of the Paper Book show growing of Wheat, Bajra, Makki, Chari etc. Moreover, in this case we find that the lower authorities have disregarded the evidence produced by the assessee by merely disbelieving the same, and without bringing on record any clinching .evidence to the contrary. Therefore; in view of the Copies of Khasra Girdawri of the relevant period, relied upon by the assessee it can be said that in the period of two years immediately preceding the date of transfer the lands in question were used for agricultural purposes, and accordingly assessee satisfies the conditions mentioned in section 10(37)(ii) of the Act. Merely because the land was adjoining a developed area would not take away the agricultural use of the land portrayed by the khasra girdawris. Therefore, our conclusion that use of the land for agricultural purposes stands proved. It may be mentioned that the Id. Counsel for the assessee conceded that the lands mentioned in girdawri at Khasra Nos. 420 and 421 have not been put to use for agricultural purposes as certain buildings were constructed, thereon, as evidence by the Khasra Girdawri. Therefore the corresponding enhanced compensation received this year shall not be eligible for exemption under section 10(37) of the Act.

10. Insofar as condition prescribed in clause (iii) of section 10(37) is concerned, there is no dispute that enhanced compensation has been received by the assessee during the year in pursuance of an acquisition by the State Government under the provisions of the Land Acquisition Act, 1894.

11. Clause (iv) of section 10(37) provides that the compensation or. consideration considered exempt should be received by the assessee on or after first day of April, 2004. The impugned compensation has been clearly received by the assessee after the aforesaid date and is therefore, eligible for exemption. In this connection, as per the CIT (Appeals), the said condition is not satisfied by the assessee because the provisions of section 10(37) are applicable to cases where the agricultural land has been compulsorily acquired after 1-4-2004 and in the case of the assessee, the land has been acquired on an earlier date. In our considered opinion, the reasoning put forth by the CIT(A) is not consistent with the provisions of section 10(37)(iv). The said clause merely provides that the income ought to have been received by the assessee on or after 1-4-2004, which is not in

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dispute in the present case. Therefore, the condition prescribed in clause (iv) of section 10(37) is satisfied in this case."

12. In the result, we set aside the order of the CIT (Appeals) and direct the Assessing Officer to recompute the exemption eligible under section 10(37) of the Act, keeping in mind the non- agricultural use of the lands as conceded by the appellant. Needless to mention, the Assessing Officer shall re-compute the amount of exemption under section 10(37) of the Act after allowing the assessee a reasonable opportunity of being heard:

Thus, on this aspect, assessee partly succeeds."

14. In view of above, we are inclined to hold that the issue is squarely

covered in favour of the assessee and the CIT(A) was right in granting relief for

the assessee and we have no reason to interfere with the conclusion of CIT(A)

on this issue. Hence, ground no. 3 of the revenue being devoid of merits is

dismissed.

15. Accordingly, the appeal of the revenue is deemed to be allowed on ground

no.2 for statistical purposes and partly dismissed on ground no. 1 and 3.

In the result, the appeal of the revenue is partly allowed.

Order pronounced in the open court on 08/05/2015.

Sd/- Sd/-

(S.V. MEHROTRA) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER

DT. 8th MAY 2015 'GS'

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Copy forwarded to:-

1. Appellant 2. Respondent 3. Commissioner of Income Tax(A) 4. CIT. 5. DR By Order

Asstt. Registrar

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