Smt Shankar L. Dalal, Panaji V. Income Tax Officer Ward-1 (1), Panaji

CO 36/PAN/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9761 (ITAT-PANAJI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-04-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 24-07-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NISHANT K LD
• Keywords: Reopening of assessment; Capital asset; Business income; Depreciation; Transfer pricing; Share purchase agreement; International transaction; Question of law; Tangible material; Fair market value; Difference of opinion; Valuation report; Onus to prove; Reason to believe; Change of opinion
• Section: 143(3); 2(14); 92E; 260A; 32; 147; 148; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 178/PNJ/2013 : (ASST. YEAR : 2007 - 08) A SST . COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), PANAJI, GOA (APPELLANT) VS. SHRI DURGADAS K. PRABHU SHASTRI H.NO.1828, DESAI NAGAR, SANQUELIM, BICHOLIM, GOA PAN : AHQPS4691G (RESPONDENT) CO NO. 59/PNJ/2013 (OUT OF ITA NO. 178/PNJ/2013) : (ASST. YEAR : 2007 - 08) SHRI DURGADAS K. PRABHU SHASTRI H.NO.1828, DESAI NAGAR, SANQUELIM, BICHOLIM, GOA PAN : AHQPS4691G (CROSS OBJECTOR) VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), PANAJI, GOA (RESPONDENT) ITA NO. 129/PNJ/2013 : (ASST. YEAR : 2007 - 08) INCOME TAX OFFICER, WARD - 1(3), PANAJI, GOA (APPELLANT) VS. SHRI PUNDALIK KRISHNA KHAUNTE, NO. 4C/F2, MODEL MILENIUM VISTAS, CARAZALEM, TISWADI, GOA 403 002. PAN : ADRPK2025R (RESPONDENT) CO NO. 25/PNJ/2013 (OUT OF ITA NO. 129/PNJ/2013) : (ASST. YEAR : 2007 - 08) SHRI PUNDALIK KRISHNA KHAUNTE, NO. 4C/F2, MODEL MILENIUM VISTAS, CARAZALEM, TISWADI, GOA 403 002. PAN : ADRPK2025R (CROSS OBJECTOR) VS. INCOME TAX OFFICER, WARD - 1(3), PANAJI, GOA ( RESPONDENT ) ITA NO. 1 30 /PNJ/2013 : (ASST. YEAR : 2007 - 08) INCOME TAX OFFICER, WARD - 1(3), PANAJI, GOA (APPELLANT) VS. SMT. SUDHA PUNDALIK KHAUNTE W/O PUNDALIK KRISHNA KHAUNTE, NO. 4C/F2, MODEL MILENIUM VISTAS, CARAZALEM, TISWADI, GOA 403 002. PAN : AEUPK3177J (RESPONDENT) 2 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) CO NO. 26 /PNJ/2013 (OUT OF ITA NO. 130/PNJ/2013) : (ASST. YEAR : 2007 - 08) SMT. SUDHA PUNDALIK KHAUNTE W/O PUNDALIK KRISHNA KHAUNTE, NO. 4C/F2, MODEL MILENIUM VISTAS, CARAZALEM, TISWADI, GOA 403 002. PAN : AEUPK3177J (CROSS OBJECTOR) VS. INCOME TAX OFFICER, WARD - 1(3), PANAJI, GOA (RESPONDENT) ITA NO. 156/PNJ/2013 : (ASST. YEAR : 2007 - 08) INCOME TAX OFFICER, WARD - 2, MARGAO, GOA (APPELLANT) VS. SHRI GAJANAN NARAYAN GUINDE, BG/03, JANATA HOUSING SOCIETY, AQUEM ALTO, MARGAO, GOA. PAN : ALPPG0024L (RESPONDENT) CO NO. 31/PNJ/2013 (OUT OF ITA NO. 156/PNJ/2013 ) : (ASST. YEAR : 2007 - 08) SHRI GAJANAN NARAYAN GUINDE, BG/03, JANATA HOUSING SOCIETY, AQUEM ALTO, MARGAO, GOA. PAN : ALPPG0024L (CROSS OBJECTOR) VS. INCOME TAX OFFICER, WARD - 2, MARGAO, GOA (RESPONDENT) ITA NO. 174/PNJ/2013 : (ASST. YEAR : 2007 - 08) INCOME TAX OFFICER, WARD - 1(1), PANAJI, GOA (APPELLANT) VS. SHRI SHANKAR LAXMAN DALAL, BUILDING 1 - B, KAMAT PLAZA, ST INEZ, PANAJI, GOA. PAN : AAQPL9893G (RESPONDENT) CO NO. 36/PNJ/2013 (OUT OF ITA NO. 174/PNJ/2013) : (ASST. YEAR : 2007 - 08) SHRI SHANKAR LAXMAN DALAL, BUILDING 1 - B, KAMAT PLAZA, ST INEZ, PANAJI, GOA (CROSS OBJECTOR) PAN : AAQPL9893G VS. INCOME TAX OFFICER, WARD - 1(1), PANAJI, GOA (RESPONDENT) 3 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) ITA NO. 175/PNJ/2013 : (ASST. YEAR : 2007 - 08) INCOME TAX OFFICER, WARD - 1(1), PANAJI, GOA (APPELLANT) VS. SMT. GAURI SHANKAR DALAL, BUILDING 1 - B, KAMAT PLAZA, ST INEZ, PANAJI, GOA. PAN : AGVPS4927R (RESPONDENT) CO NO. 37/PNJ/2013 (OUT OF ITA NO. 175/PNJ/2013) : (ASST. YEAR : 2007 - 08) SMT. GAURI SHANKAR DALAL, BUILDING 1 - B, KAMAT PLAZA, ST INEZ, PANAJI, GOA (CROSS OBJECTOR) PAN : AGVPS4927R VS. INCOME TAX OFFICER, WARD - 1(1), PANAJI, GOA (RESPONDENT) ITA NO. 144/PNJ/2013 : (ASST. YEAR : 2007 - 08) INCOME TAX OFFICER, WARD - 2(3), PANAJI, GOA (APPELLANT) VS. SHRI PRABHAKAR K. PRABHU SHASTRI, C/O. DURGADAS PRABHU SHASTRI, H.NO.1828, DESAINAGAR, SANQUELIM, GOA 403 505. PAN : AHQPP1905J (RESPONDENT) CO NO. 41/PNJ/2013 (OUT OF ITA NO. 144/PNJ/2013) : (ASST. YEAR : 2007 - 08) SHRI PRABHAKAR K. PRABHU SHASTRI, C/O. DURGADAS PRABHU SHASTRI, H.NO.1828, DESAINAGAR, SANQUELIM, GOA 403 505 (CROSS OBJECTOR) PAN : AHQPP1905J VS. INCOME TAX OFFICER, WARD - 2(3), PANAJI, GOA ( RESPONDENT ) ITA NO. 161/PNJ/2013 : (ASST. YEAR : 2007 - 08) INCOME TAX OFFICER, WARD - 1, MARGAO, GOA (APPELLANT) VS. SHRI GOPAL VENKATESH PRABHU, H# 1015, BABREM, LOLIEM, CANACONA, GOA. PAN : ABDPV7490D (RESPONDENT) 4 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) CO NO. 40/PNJ/2013 (OUT OF ITA NO. 161/PNJ/2013) : (ASST. YEAR : 2007 - 08) SHRI GOPAL VENKATESH PRABHU, H# 1015, BABREM, LOLIEM, CANACONA, GOA (CROSS OBJECTOR) PAN : ABDPV7490D VS. INCOME TAX OFFICER, WARD - 1, MARGAO, GOA (RESPONDENT) ITA NO. 160/PNJ/2013 : (ASST. YEAR : 2007 - 08) INCOME TAX OFFICER, WARD - 3, MARGAO, GOA (APPELLANT) VS. SMT. SONIA RADHESH GAJANAN GUINDE, AF - 6, BLDG A - 2, CD PATANGA, AQUEM ALTO, MARGAO, GOA (RESPONDENT) PAN : ALQPG7117F CO NO. 35/PNJ/2013 (OUT OF ITA NO. 160/PNJ/2013) : (ASST. YEAR : 2007 - 08) SMT. SONIA RADHESH GAJANAN GUINDE, AF - 6, BLDG A - 2, CD PATANGA, AQUEM ALTO, MARGAO, GOA (CROSS OBJECTOR) PAN : ALQPG7117F VS. INCOME TAX OFFICER, WARD - 3, MARGAO, GOA (RESPONDENT) ITA NO. 159/PNJ/2013 : (ASST. YEAR : 2007 - 08) INCOME TAX OFFICER, WARD - 3, MARGAO, GOA (APPELLANT) VS. SHRI RADHESH GAJANAN GUINDE BLOCK AF - 6, BLDG A - 2, CD PATANGA, AQUEM ALTO, MARGAO, GOA (RESPONDENT) PAN : ALPPG0026J CO NO. 34/PNJ/2013 (OUT OF ITA NO. 159/PNJ/2013) : (ASST. YEAR : 2007 - 08) SHRI RADHESH GAJANAN GUINDE BLOCK AF - 6, BLDG A - 2, CD PATANGA, AQUEM ALTO, MARGAO, GOA (CROSS OBJECTOR) PAN : ALPPG0026J VS. INCOME TAX OFFICER, WARD - 3, MARGAO, GOA (RESPONDENT) 5 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) ITA NO. 158/PNJ/2013 : (ASST. YEAR : 2007 - 08) INCOME TAX OFFICER, WARD - 2, MARGAO, GOA (APPELLANT) VS. SMT. ARCHANA SHAILESH GUINDE, BG/03 JANATA HOUSING SOCIETY, AQUEM ALTO, MARGAO, GOA PAN : ALPPG002 5M (RESPONDENT) CO NO. 33/PNJ/2013 (OUT OF ITA NO. 158/PNJ/2013) : (ASST. YEAR : 2007 - 08) SMT. ARCHANA SHAILESH GUINDE, BG/03 JANATA HOUSING SOCIETY, AQUEM ALTO, MARGAO, GOA PAN : ALPPG0025M (CROSS OBJECTOR VS. INCOME TAX OFFICER, WARD - 2, MARGAO, GOA (RESPONDENT) ITA NO. 157/PNJ/2013 : (ASST. YEAR : 2007 - 08) INCOME TAX OFFICER, WARD - 2, MARGAO, GOA (APPELLANT) VS. SHRI SHAILESH GAJANAN GUINDE, BG/03 JANATA HOUSING SOCIETY, AQUEM ALTO, MARGAO, GOA PAN : AHLPG9005B (RESPONDENT) CO NO. 32/PNJ/2013 (OUT OF ITA NO. 157/PNJ/2013) : (ASST. YEAR : 2007 - 08) SHRI SHAILESH GAJANAN GUINDE, BG/03 JANATA HOUSING SOCIETY, AQUEM ALTO, MARGAO, GOA PAN : AHLPG9005B (CROSS OBJECTOR) VS. INCOME TAX OFFICER, WARD - 2, MARGAO, GOA (RESPONDENT) ASSESSEE BY : JITENDRA JAIN, ADV. REVENUE BY : NISHANT K., LD. DR DATE OF HEARING : 07/05/2014 DATE OF PRONOUNCEMENT : 06 /0 6 /2014 O R D E R PER P.K. BANSAL 1. THESE APPEALS HAVE BEEN FILED BY THE DEPARTMENT AND THE CROSS OBJECTIONS BY THE ASSESSEE AGAINST THE ORDER S OF CIT(A) , ALL DT. 8.4.2013 FOR 6 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) A.Y 2007 - 08. THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL HAVE BEEN TAKEN BY THE REVENUE AND THE ASSESSEE IN THEIR RESPECTIVE APPEALS AND CROSS OBJECTIONS. ITA NO S . 129 & 1 30 /PNJ/2013 1. THE LD. CIT(A) ERRED ON FACT TREATING THE SALE OF LAND AT LOLIEM CANACONA GOA WAS NOT A CAPITAL ASSET AS PER SECTION 2(14) OF THE IT ACT. 2. THE LD. CIT(A) HAS NOT CONSIDERED IN COMPUTING CAPITAL GAIN OF RS.81,46,760/ - IN RESPECT OF SALE OF LAND AT LOLIM, CANACONA, GOA. 3. THE LD. CIT(A) ERRED ON FACT AND IN LAW HAS DIRECTED TO DELETE THE ADDITION ON THE GROUNDS THAT SALE OF LAND IS TREATED AS AGRICULTURAL LAND AND NOT A CAPITAL ASSET. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED BY GIVING RELIEF TO THE ASSESSEE IN RESPECT OF COMPUTING CAPITAL GAINS OF RS.81,46,760/ - FROM SALE OF LAND AT LOLIM, CANACONA GOA, WHICH IS SITUATED IN THE VILLAGE PANCHAYAT. CO NO. 25 & 26 /PNJ/2013 (ITA NO. 129 & 130 /PNJ/2013 ) 1. THE CROSS OBJECTOR SUBMITS THAT THE ASSESSING OFFICER ERRED IN ASSUMING JURISDICTION U/S. 147 WHEN THE JURISDICTIONAL CONDITIONS WERE NOT FULFILLED. 2. THE ASSESSING OFFICER ERRED IN RESORTING TO THE PROVISIONS OF SECTION 147 WITHOUT HAVING REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. 3. THE ASSESSING OFFICER ERRED IN ATTEMPTING TO IMPROVE UPON THE REASONS RECORDED AT THE TIME OF REOPENING THE ASSESSMENT. 4. EVEN ASSUMING, THOUGH NOT CONCEDING, THAT THE ASSESSING OFFICERS GROUND IS TO BE ALLOWED, THE ASSESSING OFFICER ERRED IN ADOPTING THE FAIR MARKET VALUE OF AGRICULTURAL LAND SOLD DURING THE YEAR AS AT 1ST APRIL, 1981 @ RS. 5/ - PER SQ. MTR. THE APPELLANT SUBMITS THAT THE VALUE OF THE SAID LAND AS AT 1ST APRIL, 1981 IS S UBSTANTIALLY HIGHER AND THAT THE ASSESSING OFFICER BE DIRECTED TO ADOPT THE SAID HIGHER VALUE. 5. EVEN ASSUMING, THOUGH NOT CONCEDING, THAT THE ASSESSING OFFICERS GROUND IS TO BE ALLOWED, THE ASSESSING OFFICER ERRED IN NOT GRANTING DEDUCTION FOR BROKERAG E PAID BY THE APPELLANT ON THE SALE OF THE SAID AGRICULTURAL LAND. 7 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) ITA NO S . 1 78 /PNJ/2013 1. THE LD. COMMISSIONER OF INCOME TAX (APPEAL), PANAJIS ORDER IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN RELYING ON JUDGEMENT OF THE JURISDICTIONAL MUMBAI HIGH COURT IN THE CASE OF CIT VS. DEBBIE ALEMAO & CIT VS. MINGUEL CHANDRA PAIS AS THE FACTS OF THE CASE ARE ENTIRELY DIFFERENT FROM PRESENT ONE, AS IN THE REFERRED CASE AGRICULTURAL ACTIVITIES WERE ACTUA LLY CARRIED OUT. 3. THE LD. CIT(A) FAILED TO APPRECIATE THAT LAND NOT AGRICULTURAL THOUGH ENTERED IN THE REVENUE RECORD AS AGRICULTURAL IN VIEW OF CASE LAW IN THE CASE OF SARIFABIBI MOHAMMED IBRAHIM AND OTHERS VS. CIT(SC) 204 ITR 631, CHEMANCHERRY ESTATES CO. VS. ITO (ITAT CHENNAI) 118TTJ 691; DTR 478. 4. THE CIT(A) FAILED TO APPRECIATE THAT BURDEN OF PROOF IS ON ASSESSEE TO SHOW THAT IT WAS AGRICULTURAL LAND FOREST LAND ACQUIRED WITH THE INTENTION OF EXTENDING PLANTATION NO AGRICULTURAL OPERATION CAR RIED OUT TRANSFER OF LAND LEAD TO CAPITAL GAINS IN VIEW OF CASE LAW IN THE CASE OF KALPETTA ESTATES LIMITED VS. CIT (KER) 185 ITR 318. 5. THE LD. CIT(A) FAILED TO APPRECIATE THAT EVIDENCE SHOWING THAT NO AGRICULTURAL OPERATIONS WERE CARRIED OUT ON LAND, LAND NOT AGRICULTURAL LIABLE TO CAPITAL GAINS IN VIEW OF CASE LAW IN THE CASE OF FAZALBHOY INVESTMENT CO. LTD. VS. CIT(BOM) 176 ITR 523. 6. THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE LAND IS SOLD OR TRANSFERRED TO A NON AGRICULTURIST FOR A N ON AGRICULTURAL PURPOSE OR WHETHER OR NOT IS LIKELY TO BE USED FOR AGRICULTURAL PURPOSE SOON AFTER ITS TRANSFER IS ALSO A RELEVANT FACTOR GERMANE TO THE DETERMINATION OF THE ISSUE IN VIEW OF CASE LAW IN THE CASE OF GOPAL C SHARMA VS. CIT(BOM) 209 ITR 946. CO NO. 59 /PNJ/2013 (ITA NO. 178 /PNJ/2013 ) 1. THE LEARNED CIT(A) ERRED IN LAW IN NOT ADJUDICATING THE GROUND THAT THE ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN ASSUMING ASSESSMENT JURISDICTION. 2. THE LEARNED CIT(A) ERRED IN LAW IN NOT ADJUDICATING THE GROUND THAT THE ASSESSING OFFICER FURTHER ERRED IN LAW AND ON FACTS IN ASSUMING JURISDICTION U/S 148 AND CONSEQUENTLY THE ASSESSMENT ORDER PASSED U/S 147 R.W.S. 144 IN BAD IN LAW. 8 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) ITA NOS. 156 TO 161 /PNJ/2013 1. THE LD. COMMISSIONER OF INCOME TAX (A PPEAL), PANAJIS ORDER IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN RELYING ON JUDGEMENT OF THE JURISDICTIONAL MUMBAI HIGH COURT IN THE CASE OF CIT VS. DEBBIE ALEMAO & CIT VS. MINGUEL CHANDRA PAIS AS THE FACTS OF THE CASE ARE ENTIRELY DIFFERENT FROM PRESENT ONE, AS IN THE REFERRED CASE AGRICULTURAL ACTIVITIES WERE ACTUALLY CARRIED OUT. 3. THE LD. CIT(A) FAILED TO APPRECIATE THAT LAND NOT AGRICULTURAL THOUGH ENTERED IN THE REVENUE RECORD AS AGRICULTUR AL IN VIEW OF CASE LAW IN THE CASE OF SARIFABIBI MOHAMMED IBRAHIM AND OTHERS VS. CIT(SC) 204 ITR 631, CHEMANCHERRY ESTATES CO. VS. ITO (ITAT CHENNAI) 118TTJ 691; DTR 478. 4. THE CIT(A) FAILED TO APPRECIATE THAT BURDEN OF PROOF IS ON ASSESSEE TO SHOW THAT IT WAS AGRICULTURAL LAND FOREST LAND ACQUIRED WITH THE INTENTION OF EXTENDING PLANTATION NO AGRICULTURAL OPERATION CARRIED OUT TRANSFER OF LAND LEAD TO CAPITAL GAINS IN VIEW OF CASE LAW IN THE CASE OF KALPETTA ESTATES LIMITED VS. CIT (KER) 185 ITR 31 8. 5. THE LD. CIT(A) FAILED TO APPRECIATE THAT EVIDENCE SHOWING THAT NO AGRICULTURAL OPERATIONS WERE CARRIED OUT ON LAND, LAND NOT AGRICULTURAL LIABLE TO CAPITAL GAINS IN VIEW OF CASE LAW IN THE CASE OF FAZALBHOY INVESTMENT CO. LTD. VS. CIT(BOM) 176 ITR 523. 6. THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE LAND IS SOLD OR TRANSFERRED TO A NON AGRICULTURIST FOR A NON AGRICULTURAL PURPOSE OR WHETHER OR NOT IS LIKELY TO BE USED FOR AGRICULTURAL PURPOSE SOON AFTER ITS TRANSFER IS ALSO A RELEVANT FAC TOR GERMANE TO THE DETERMINATION OF THE ISSUE IN VIEW OF CASE LAW IN THE CASE OF GOPAL C SHARMA VS. CIT(BOM) 209 ITR 946. CO NO S . 31 - 35 & 40/PNJ/2013 (ITA NO S . 156 TO 161 /PNJ/2013 ) 1. THE CROSS OBJECTOR SUBMITS THAT THE ASSESSING OFFICER ERRED IN ASSUMING JURISDICTION U/S 147 WHEN THE JURISDICTIONAL CONDITIONS WERE NOT FULFILLED. 2. THE ASSESSING OFFICER ERRED IN RESORTING TO THE PROVISIONS OF SECTION 147 WITHOUT HAVING REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT 9 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) 3. THE ASSESSING OFFICER ERRED IN ATTEMPTING TO IMPROVE UPON THE REASONS RECORDED AT THE TIME OF REOPENING THE ASSESSMENT. 4. THE ASSESSING OFFICER ERRED IN ADOPTING THE FAIR MARKET VALUE OF AGRICULTURAL LAND SOLD DURING THE YEAR AS AT 1 ST APRIL, 1981 @ RS.5/ - PER SQ. MTR. THE APPELLANT SUBMITS THAT THE VALUE OF THE SAID LAND AS AT 1 ST APRIL, 1981 IS SUBSTANTIALLY HIGHER AND THAT THE ASSESSING OFFICER BE DIRECTED TO ADOPT THE SAID HIGHER VALUE. ITA NOS. 174 & 175/PNJ/2013 1. ON THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) GROS SLY ERRED BY NOT CONSIDERING THE FACT THAT IT IS NOT MENTIONED IN THE SALE DEED THAT PROPERTY SOLD IS AN AGRICULTURAL LAND. 2. ON THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) ERRED BY NOT APPRECIATING THE FACT SEEN FROM THE EXTRACT OF FORM NO. 1 & XIV FURNIS HED BY THE SUB - REGISTRAR THAT THE DETAILS OF CROPPED AREA IS MENTIONED AS NIL. 3. ON THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) ERRED BY NOT APPRECIATING THE FACT THAT ASSESSEE HAS NOT SHOWN ANY AGRICULTURAL RECEIPTS IN THE RETURNS OF INCOME FILED FOR THE PREVIOUS THREE YEARS PRECEDING TO THE A.Y. 2007 - 08 EVIDENCING THAT THE ASSESSEE IS IN RECEIPT OF AGRICULTURAL INCOME. 4. ON THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) GROSSLY ERRED BY NOT CONSIDERING THE FACT THAT ASSESSEE HAS SOLD THE PROPERTY TO A NON - AG RICULTURIST FOR NON - AGRICULTURAL PURPOSE. CO NOS. 36 & 37/PNJ/2013 (ITA NO S . 174 & 175/PNJ/2013) 1. THE CROSS OBJECTOR SUBMITS THAT THE ASSESSING OFFICER ERRED IN ASSUMING JURISDICTION U/S 147 WHEN THE JURISDICTIONAL CONDITIONS WERE NOT FULFILLED. 2. THE ASSESSING OFFICER ERRED IN RESORTING TO THE PROVISIONS OF SECTION 147 WITHOUT HAVING REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT 3. THE ASSESSING OFFICER ERRED IN ATTEMPTING TO IMPROVE UPON THE REASONS RECORDED AT THE TIME OF REO PENING THE ASSESSMENT. 4. THE ASSESSING OFFICER ERRED IN ADOPTING THE FAIR MARKET VALUE OF AGRICULTURAL LAND SOLD DURING THE YEAR AS AT 1 ST APRIL, 1981 @ RS.5/ - PER SQ. MTR. THE APPELLANT SUBMITS THAT THE VALUE OF THE SAID LAND AS AT 1 ST APRIL, 1981 IS SUBS TANTIALLY HIGHER AND THAT THE ASSESSING OFFICER BE DIRECTED TO ADOPT THE SAID HIGHER VALUE. 10 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) ITA NO. 144/PNJ/2013 1. THE ORDER OF CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN D ELETING THE ADDITION OF CAPITAL GAINS TO THE TUNE OF RS.2,62,93,527/ - . 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN TREATING THE SALE CONSIDERATION RECEIVED FROM THE SALE OF LAND AS AGRICULTURAL LAND INSTEAD OF NON - AGRI CULTURAL LAND. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT CONSIDERING THAT THE SAID LAND HAD ONLY NATURAL VEGETATION AND NO AGRICULTURAL ACTIVITIES HAVE BEEN TAKEN PLACE FOR SO MANY YEARS. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT CONSIDERING THE CERTIFICATE ISSUED BY THE CONCERNED TALATHI OF VILLAGE PANCHAYAT OF LOILEM, GOA STATING THAT THE SAID LAND WAS NOT CULTIVATED FOR SO MANY YEARS. 6. ON THE FACTS AND CIRCUMSTANC ES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT DEMANDING THE ASSESSEE TO PRODUCE THE MATERIAL EVIDENCE SUCH AS CROPS GROWN, FERTILIZERS PURCHASE BILLS, SEED/SAPLINGS PURCHASE BILLS, LABOUR PAYMENTS VOUCHERS ETC., ETC TO PROVE THAT THE ASSESSEE IS C ARRYING ON THE AGRICULTURAL ACTIVITIES ON THE GIVEN POINT OF TIME TO ESTABLISH THAT THE LAND IS IN CULTIVABLE STATE. CO NO. 41/PNJ/2013 (ITA NO. 144/PNJ/2013) 1. THE CROSS OBJECTOR SUBMITS THAT THE ASSESSING OFFICER ERRED IN ASSUMING JURISDICTION U/S 147 WHEN THE JURISDICTIONAL CONDITIONS WERE NOT FULFILLED. 2. THE ASSESSING OFFICER ERRED IN RESORTING TO THE PROVISIONS OF SECTION 147 WITHOUT HAVING REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT 3. THE ASSESSING OFFICER ERRED IN ATTEMP TING TO IMPROVE UPON THE REASONS RECORDED AT THE TIME OF REOPENING THE ASSESSMENT. 4. THE ASSESSING OFFICER ERRED IN ADOPTING THE FAIR MARKET VALUE OF AGRICULTURAL LAND SOLD DURING THE YEAR AS AT 1 ST APRIL, 1981 @ RS.5/ - PER SQ. MTR. THE APPELLANT SUBMITS T HAT THE VALUE OF THE SAID LAND AS AT 1 ST APRIL, 1981 IS SUBSTANTIALLY HIGHER AND THAT THE ASSESSING OFFICER BE DIRECTED TO ADOPT THE SAID HIGHER VALUE. 11 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) 2. ALL THESE APPEALS AND CROSS OBJECTIONS, SINCE INVOLVE COMMON ISSUE, BOTH THE PARTIES AGREED THAT ALL THESE APPEALS AND CROSS OBJECTIONS BE DISPOSED OFF ON THE BASIS OF THE FACTS IN THE CASE OF PUNDALIK KRISHNA KHAUNTE (ITA NO. 129/PNJ/2013 AND CO NO. 25/PNJ/2013). IT WAS ALSO STATED THAT THE FACTS INVOLVED IN ALL THESE CASES ARE COMMON AND WHATEVER VIEW THIS TRIBUNAL MAY TAKE IN THE CASE OF PUNDALIK KRISHNA KHAUNTE, THE SAME VIEW WILL BE ACCEPTABLE IN CASE OF OTHER ASSESSEES. SINCE THE FACTS INVOLVED, AND THE ISSUES INVOLVED, IN ALL THESE CASES ARE COMMON, WE, THEREFORE, AGREED THAT ALL THESE APPEALS SH ALL BE DISPOSED OFF ON THE BASIS OF THE FACTS INVOLVED IN THE CASE OF PUNDALIK KRISHNA KHAUNTE. 3. THE BRIEF FACTS INVOLVED IN THE CASE OF PUNDALIK KRISHNA KHAUNTE ARE THAT THE ASSESSEE FILED HIS INCOME TAX RETURN FOR A.Y 2007 - 08 ON 30.7.2007 AT AN INCOME OF RS. 1,76,405/ - WHICH WAS PROCESSED U/S 143(1) ON 27.2.2008. IN THE FOOTNOTE OF THE RETURN THE ASSESSEE HAD MENTIONED THAT HE HAS RECEIVED SALE PROCEEDS FROM THE SALE OF AGRICULTURAL LAND AMOUNTING TO RS.1,38,12,166/ - (HALF SHARE OF RS.2,76,24,333/ - ). SUBSEQUENTLY, ITO, WARD - 1(3), PANAJI ISSUED NOTICE U/S 148 DT. 7.2.2012 TO THE ASSESSEE FOR RE - OPENING OF ASSESSMENT FOR A.Y 2007 - 08 BY RECORDING THE FOLLOWING REASONS : SRI. PUNDALIK KRISHNA KAUNTE ASST. YEAR 2007 - 08 REASON FOR ISSUE OF NOTICE U/S 148 : IT HAS COME TO THE NOTICE THAT SRI. PUNDALIK KRISHNA KHAUNTE HAS RECEIVED 1/6 TH SHARE OF RS.2,76,24,333/ - ON SALE OF PROPERTY SITUATED WITH IN TH E LIMIT OF VILLAGE OF PANCHAYAT OF LOLI E M IN CAN A CONA TALUKA SOUTH GOA BEARING SY NO. 352/1, OUT OF TOTAL SALE CONSIDERATION AMOUNT OF RS.16,34,24,748/ - . ON PERUSAL OF THE RETURN OF INCOME FILED BY THE ASSESSEE FOR A.Y.2007 - 08 ON 30 TH JULY 2007 , IT IS NOTICED THAT THE ASSESSEE HAS NOT DECLARED EITHER CAPITAL GAINS INCOME OR BUSINESS INCOME FROM THE SALE OF THE AB OVE SAID PROPERTY, INSTEAD , THE ASSESSEE HAS MENTIONED THAT THE SALE PROCEEDS RECEIVED FROM THE SALE OF AGRICULTURAL LAND IS NOT A CAPITAL ASSET U/S 2(14) OF I.T. ACT 1961 AS IT IS SITUATED BEYOND 8 KMS FROM LOCAL LIMITS OF MUNICIPALITY. THIS 12 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) FACT REQUIRE S TO BE EXAMINED. HENCE, I HAVE REASON TO BELIEVE THAT THE INCOME FROM THE SALE OF ABOVE SAID LAND CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 2007 - 08. ISSUE NOTICE U/S 148 DATE : 07/02/2012 SD/ - (ANNU NAIK C H) INCOME TAX OFFICER ,WARD1(3),PANAJI 4. IN RESPONSE TO THIS NOTICE, THE ASSESSEE VIDE LETTER DT. 19.3.2012 REQUESTED THE AO TO TREAT THE ORIGINAL RETURN FILED BY THE ASSESSEE TO BE THE ONE FILED IN RESPONSE TO THE SAID NOTICE. THE ASSESSEE ALSO ASKED FOR REASONS FOR RE - OPENING OF THE ASSESSMENT WHICH WAS INTIMATED TO THE ASSESSEE BY THE AO VIDE LETTER DT. 20.3 .2012. THE ASSESSEE SUBSEQUENTLY VIDE HIS LETTER DT. 2.4.2012 FILED HIS OBJECTION AGAINST THE RE - OPENING OF THE ASSESSMENT BY MAKING DETAILED SUBMISSION THAT THE NOTICE ISSUED U/S 148 IS NOT VALID AND THE PROCEEDING S INITIATED U/S 147 BE DROPPED. THE AO AFTER DISPOSING OFF THE OBJECTIONS COMPLETED THE ASSESSMENT U/S 143(3) R.W.S. 147 ON RECEIVING THE NECESSARY INFORMATION/CLARIFICATION/ DETAILS FROM THE ASSESSEE VIDE HIS ORDER DT. 15.10.2012 BRINGING TO TAX THE CAPITAL GAIN OF RS.81,46,764/ - AS COMPUTED BY HIM IN RESPECT OF THE SALE OF THE AFORESAID AGRICULTURAL LAND AT LOLIEM, CANACONA, GOA, WHICH ACCORDING TO HIM WAS CAPITAL ASSET U/S 2 (14) OF THE INCOME TAX ACT. SIMILARLY, THE CAPITAL GAIN WAS ASSESSED IN THE HANDS OF ALL OTHER ASSESSEES AS THEY WERE ALSO CO - OWNERS. THE ASSESSEE AND ALL OTHER CO - OWNERS WENT IN APPEAL BEFORE THE CIT(A). 5 . THE FIRST ISSUE INVOLVED IN THE APPEAL BEFORE THE CIT(A), RELATES TO THE VALIDITY OF THE ACTION INITIATED U/S 147 AND ALSO THE VALIDITY OF THE ASSESSMENT MADE IN CONSEQUENCE OF NOTICE ISSUED U/S 148. THE SECOND ISSUE RELATES TO WHETHER THE AGRICULTURAL LAND SOLD BY THE ASSESSEE IS A CAPITAL A SSET AS DEFINED 13 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) U/S 2(14) OF THE INCOME TAX ACT OR NOT. THE THIRD ISSUE RELATES TO THE COMPUTATION OF CAPITAL GAINS - IN CASE THE AGRICULTURAL LAND IS TREATED AS CAPITAL ASSET, WHAT WILL BE THE FAIR MARKET VALUE AS ON 1.4.1981. THE ASSESSEE PAID BROKERAG E TO THE BROKER ON THE SALE OF THE LAND. WHETHER THIS BROKERAGE IS DEDUCTIBLE OR NOT? 6 . THE CIT(A) DECIDED THE ISSUE RELATING TO THE RE - OPENING OF THE ASSESSMENT AGAINST THE ASSESSEE. THE ISSUE RELATING TO CHARGEABILITY OF CAPITAL GAINS WAS DECIDED I N FAVOUR OF THE ASSESSEE BY HOLDING THAT THE LAND SOLD BY THE ASSESSEE REPRESENTS AGRICULTURAL LAND AND THERE IS NO CAPITAL GAINS AND IN CONSEQUENCE THEREOF, HE DELETED THE ADDITION MADE AS CAPITAL GAINS. THE OTHER ISSUES TAKEN BY THE ASSESSEE WERE NOT DE CIDED AS ACCORDING TO HIM, THE OTHER GROUNDS OF APPEAL OF THE ASSESSEE BECAME INFRUCTUOUS AND THEREFORE DID NOT REQUIRE ADJUDICATION. THE REVENUE CAME IN APPEAL AND CROSS OBJECTION HAVE BEEN FILED BY THE RESPECTIVE ASSESSEES. 7 . SINCE THE CROSS OBJECTION FILED BY THE ASSESSEE INVOLVES LEGAL ISSUES WHICH GOES TO THE ROOT OF THE ASSESSMENT REGARDING THE VALIDITY OF THE INITIATION OF THE PROCEEDINGS U/S 147, WE DECIDED TO DISPOSE OFF FIRST THE LEGAL GROUND TAKEN IN THE CROSS OBJECTION REGARDING THE VALIDITY O F THE INITIATION OF THE PROCEEDINGS U/S 147 WHICH HAS BEEN TAKEN BY THE ASSESSEE IN GROUND NOS. 1 TO 3. 8. THE LD. AR BEFORE US CONTENDED THAT THE PROCEEDING INITIATED U/S 147 IS NOT VALID. NO DOUBT THE ORIGINAL RETURN HAS BEEN PROCESSED U/S 143(1), BUT THERE IS NO REASON TO BELIEVE. REASON TO BELIEVE CANNOT BE BONA FIDE UNTIL AND UNLESS THE AO HAS FRESH TANGIBLE MATERIAL. THERE WAS NO FRESH MATERIAL IN THE POSSESSION OF THE AO. IN THIS REGARD, RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE DELHI H IGH COURT IN THE CASE OF CIT V/S ORIENT CRAFT LTD., 354 ITR 536 14 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) (DEL.) . RELIANCE WAS ALSO PLACED ON THE FOLLOWING CASES FOR THE VALIDITY OF RE - OPENING : I) CIT VS. VARSHA GOYAL, 319 ITR 92 (P&H) II) INDUCTOTHERM (INDIA) (P.) LTD. VS. DCIT, 356 ITR 481 (GUJ) III) INDIVEST PTE LTD. VS. ADDL. DIT. , 350 ITR 120 (BOM) IV) CIT VS. SMT. MANIBEN VALIJI SHAH, 283 ITR 453 (BOM) V) BALKRISHNA HIRALAL WANI VS. ITO, 321 ITR 519 (BOM) VI) PRASHANT S. JOSHI & ANR. VS. ITO, 324 ITR 154 (BOM) VII) CIT VS. BATRA BHATTA COMPANY, 321 ITR 526 (DEL) 9. THE LD. DR, ON THE OTHER HAND, RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD., 291 ITR 500 (SC) . HE CONTENDED THAT WHERE RETURN HAS BEEN PROCESSED U/S 143(1) , THERE IS NO ASSESSMENT. I T IS MERELY INTIMATION . REASON TO BELIEVE DOES NOT REQUIRE THAT THERE SHOULD BE FRESH MATERIAL ON WHICH A REASONABLE PERSON CO ULD FORM THE REQUISITE BELIEF. THERE IS NO APPLICATION OF MIND OF THE ASSESSING OFFICER SO THAT IT CAN BE SAID THAT THERE IS CHANGE IN OPINION. 10. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITI ES BELOW AS WELL AS THE MATERIAL AND THE RELEVANT PROVISIONS OF THE INCOME TAX ACT. WE HAVE GONE THROUGH THE CASE LAWS AS HAS BEEN RELIED ON BEFORE US FROM BOTH THE SIDES. BEFORE DECIDING THE ISSUE INVOLVED, IT IS EXPEDIENT TO DISCUSS THE RELEVANT PROVIS IONS. THE RELEVANT PROVISIONS OF SEC. 147 ARE REPRODUCED AS UNDER : 147 . IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 , ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS 15 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOW ANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB - SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASS ESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB - SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS A SSESSMENT, FOR THAT ASSESSMENT YEAR: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IN A CASE WHERE ANY INCOME IN RELATION TO ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA, CHARGEABLE TO TAX, HAS ES CAPED ASSESSMENT FOR ANY ASSESSMENT YEAR: PROVIDED ALSO THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVING MATTERS WHICH ARE THE SUBJECT MATTERS OF ANY APPEAL, REFERENCE OR REVISION, WHICH IS CHARGEABLE TO TAX AND HAS ESCAPED ASSESSMENT. EXPLANATION 1. PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLO SURE WITHIN THE MEANING OF THE FOREGOING PROVISO. EXPLANATION 2. FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY : ( A ) WHERE NO RETURN OF INCOME HAS BEEN FUR NISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME - TAX ; ( B ) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN ; ( BA ) WHERE THE A SSESSEE HAS FAILED TO FURNISH A REPORT IN RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE WAS SO REQUIRED UNDER SECTION 92E ; ( C ) WHERE AN ASSESSMENT HAS BEEN MADE, BUT ( I ) INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESSED ; OR 16 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) ( II ) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE ; OR ( III ) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT ; OR ( IV ) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED; ( D ) WHERE A PERSON IS FOUND TO HAVE ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA. EXPLANATION 3. FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT UNDER THIS SECTION, THE ASSESSING OFFICER MAY ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED ASSESSMENT, AND SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDIN GS UNDER THIS SECTION, NOTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SUB - SECTION (2) OF SECTION 148 . EXPLANATION 4. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT THE PROVISIONS OF THIS SECTIO N, AS AMENDED BY THE FINANCE ACT, 2012, SHALL ALSO BE APPLICABLE FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012. 10 .1 FROM READING OF THIS SECTION, IT IS APPARENT THAT THIS SECTION EMPOWERS THE AO TO ASSESS OR RE - ASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THIS SECTION AUTHORIZES THE AO NOT ONLY TO RE - ASSESS BUT ALSO TO ASSESS THE ASSESSEE IN RESPECT OF AN INCOME WHICH ESCAPED ASSESSMENT. FOR INITIAT ING THE PROCEEDINGS UNDER THIS SECTION, NO DOUBT THERE MUST BE REASON TO BELIEVE. REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF THE AO HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAS ESCAPED ASSESSMENT, IT CAN BE SAID THAT ASS ESSING OFFICER HAS REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD., 291 ITR 500 ( SC ) HAS CATEGORICALLY HELD THAT PROCESSING OF THE RETURN U/S 143(1) BY WA Y OF INTIMATION IS NOT AN ASSESSMENT. INITIATING ACTION U/S 147 IN RESPECT OF INCOME ESCAPING ASSESSMENT WHERE AN INTIMATION U/S 143(1) IS ISSUED, IS COVERED BY THE MAIN PROVISION OF SEC. 147 AS SUBSTITUTED W.E.F. 1.4.1989 AND NOT BY THE PROVISO THERETO. THE ONLY CONDITION TO CLOTHE WITH THE 17 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) JURISDICTION U/S 147 IN SUCH CASE IS THAT THERE MUST BE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE REASON TO BELIEVE MEANS WHERE THERE IS RELEVANT MATERIAL ON WHICH A REASONAB LE PERSON COULD HAVE FORMED THE REQUISITE BELIEF. THE MATERIAL NEED NOT CONCLUSIVELY PROVE ESCAPEMENT OF INCOME AT THE STAGE OF THE REASON TO BELIEVE. THE PRINCIPLE OF CHANGE OF OPINION FOR REASON TO BELIEVE IS NOT APPLICABLE AS THE AO HAS NOT TO APP LY HIS MIND WHILE PROCESSING RETURN U/S 143(1). RATHER AO IS BOUND TO ACCEPT IT IF IT IS OTHERWISE A VALID RETURN AND DOES NOT HAVE ANY DEFECT. NOW, AS PER THE SCHEME OF CBDT, THE RETURN HAS TO BE PROCESSED BY THE COMPUTER AND NOT BY AO. IN THE CASE OF ASSESSEE RETURN HAS ONLY BEEN PROCESSED U/S 143(1), THEREFORE, NO QUESTION OF APPLYING THE MIND BY AO ARISES WHILE DETERMINING THE TAXABLE INCOME IS CONCERNED. THE DECISION RELIED ON BY LD. ADVOCATE DEALS WITH THE BONA FIDE OF REASON TO BELIEVE. IN THE ABSENCE OF BONA FIDE REASONS, IT IS A SETTLED LAW THAT WITHOUT REASON TO BELIEVE, THE PROCEEDINGS U/S 147 CANNOT BE INITIATED. IT IS NOT THE CASE OF THE ASSESSEE THAT THERE IS NO REASON TO BELIEVE OR REASON TO BELIEVE ARE NOT BONAFIDE. THE SUFFICIENCY OF REASONS CANNOT BE ENTERTAINED BY THIS TRIBUNAL. WE HAVE ONLY TO SEE WHETHER THERE IS MATERIAL TO FORM THE REASON TO BELIEVE. 10 . 2 WE NOTED THAT THE WORDS INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT HAS BEEN DEFINED BY EXPLANATION 2 IN SEC. 147 AS SUBSTITUTED W.E.F. 1.4.1989. SUB - CLAUSE (B) OF THE EXPLANATION IS RELEVANT FOR US. THIS SUB - CLAUSE CLEARLY MANDATES THAT WHERE INCO ME TAX RETURN HAS BEEN FILED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND THE AO NOTICES THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN, IT WILL BE DEEMED TO BE A CASE WHERE I NCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN OUR OPINION, EXPLANATION 2(B) IS CLEARLY APPLICABLE IN THE CASE OF THE ASSESSEE IN VIEW OF THE PROPOSITION OF LAW AS 18 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) PRONOUNCED BY THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BR OKERS PVT. LTD., 291 ITR 500 ( SUPRA ) AS THE ASSESSEE HAS DULY FURNISHED THE RETURN BUT NO ASSESSMENT U/S 143(3) HAS BEEN FRAMED BY THE ASSESSING OFFICER. IN THE CASE OF THE ASSESSEE, WE NOTED THAT THE RETURN FOR THE IMPUGNED ASSESSMENT HAS BEEN PROCESSED U/S 143(1) AND ISSUED THE INTIMATION. NO DECISION WAS BROUGHT TO OUR KNOWLEDGE BY THE LD. ADVOCATE HOW THE EXPLANATION 2(B) WILL NOT APPLY IN THE CASE OF ASSESSEE. 10 .3 NO DOUBT IN THE CASE OF CIT V/S ORIENT CRAFT LTD., 354 ITR 536 (DEL.) THE HON'BLE D ELHI HIGH COURT UNDER PARA 17 WHILE DEALING WITH THE SPECIFIC ARGUMENT OF THE REVENUE THAT AN INTIMATION CANNOT BE EQUATED TO AN ASSESSMENT, TOOK THE VIEW THAT THE SUBMISSION OF THE LD. DR ACTED TO BE SELF - DEFEATING BECAUSE IF AN INTIMATION IS NOT AN ASSES SMENT, THEN, IT CAN NEVER BE SUBJECTED TO SEC. 147 PROCEEDINGS AS THE SECTION COVERS ONLY AN ASSESSMENT AND WE WONDER IF THE REVENUE WOULD BE PREPARED TO CONCEDE THAT POSITION. IN OUR OPINION, SEC. 147 AUTHORISES THE AO NOT ONLY TO RE - ASSESS BUT TO ASSESS ANY INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSES SMENT FOR ANY ASSESSMENT YEAR. THE WORD CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IS DEFINED UNDER EXPLANATION 2 UNDER SUB - CLAUSE (B). SUB - CLAUSE (B) CLEARLY STATES THAT WHERE RETURN HAS BEEN FILED BUT NO ASSESSMENT HAS BEEN MADE AND THE AO NOTICES THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN, IT SHALL BE DEEMED TO BE A CASE WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. WE DO NOT FIND THAT THE EXPLANATION 2(B) HAS BEEN CONSIDERED BY THE HON'BLE HIGH COURT IN THIS DECISION WHILE THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD., 291 ITR 500 ( SUPRA ) HAS DULY REPRODUCED AT PG. 506 EXP LANATION 2(B) AND HAS OBSERVED THAT W.E.F. 1.4.1989 THE PROVISIONS OF SEC. 147 UNDERWENT SUBSTANTIAL AND MATERIAL CHANGE. NO DOUBT THE TERM INCOME CHARGEABLE TO TAX HAS ESCAPED 19 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) ASSESSMENT WAS DEFINED U/S 147 PRIOR TO 1.4.1989 UNDER EXPLANATION 1 TO SEC. 147 BUT THAT DEFINITION WAS ENTIRELY DIFFERENT. NO SUCH CLAUSE AS CLAUSE (B) UNDER EXPLANATION 2 WAS THERE IN THE DEEMING PROVISION GIVEN UNDER EXPLANATION 1 IN RESPECT OF INCOME ESCAPING ASSESSMENT UNDER THE OLD SECTION 147. WE DO NOT AGREE THAT SEC. 1 47 PROCEEDINGS COULD COVER ONLY THE REASSESSMENT. THE RELEVANT PROVISIONS OF EXPLANATION 1 TO SEC. 147 AS IT STOOD PRIOR TO 1.4.1989 READS AS UNDER : EXPLANATION 1. - FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHE RE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY: - (A) WHERE INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESSED; OR (B) WHERE SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE; OR (C) WHERE SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT OR UNDER THE INDIAN INCOME - TAX ACT, 1922 (11 OF 1922); OR (D) WHERE EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE HAS BEEN COMPUTED. 10 .4 WE, THEREFORE, DO NOT AGREE WITH THE SUBMISSION OF THE LD. ADVOCATE ON THIS ISSUE AND REJECT THE PLEA ADV ANCED IN THIS REGARD. 10 .5 NOW, COMING TO THE SECOND SUBMISSION OF THE LD. SR. ADVOCATE THAT IN VIEW OF THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAFT LTD. , 354 ITR 536 (DEL.) ( SUPRA ) AS GIVEN IN PARA 18, THERE MUST BE FRESH TANGIBLE MATERIAL WHICH SHOULD HAVE COME IN THE POSSESSION OF THE AO SUBSEQUENT TO THE ISSUE OF THE INTIMATION, WE NOTED THIS OBSERVATION OF THE HON'BLE HIGH COURT IN THAT CASE . WE ALSO NOTED THAT THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. RA JESH JHAVERI STOCK BROKERS PVT. LTD., 291 ITR 500 ( SUPRA ) NOWHERE TOOK THE VIEW THAT SOME FRESH TANGIBLE MATERIAL SHOULD COME SUBSEQUENTLY IN THE POSSESSION OF THE AO WHILE TAKING ACTION U/S 147 AFTER THE RETURN IS PROCESSED U/S 143(1). THE HON'BLE SUPREM E COURT WHILE COMPARING THE OLD PROVISIONS OF SEC. 147 AND THE PROVISIONS AS HAS BEEN SUBSTITUTED W.E.F. 1.4.1989 HAS CLEARLY LAID DOWN UNDER PARA 17 OF ITS DECISION THAT UNDER THE 20 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) SUBSTITUTED SEC. 147 EXISTENCE OF ONLY THE FIRST CONDITION IS SUFFICIENT. IF THE AO, FOR WHATEVER REASONS, HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, IT CONFERS JURISDICTION TO RE - OPEN THE ASSESSMENT. IT IS FURTHER STATED THAT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITHIN THE AMBIT OF PROVISO TO SEC. 147. NO DOUBT THE INGREDIENTS OF SEC. 147 ARE TO BE FULFILLED. THE INGREDIENTS OF SEC. 147 NOWHERE REQUIRES THAT IN CASE A RETURN IS PROCESSED U/S 143(1), THERE MUST BE TANGIBLE MATERIAL WHICH SHOULD COME TO THE POSSESSION OF THE AO SUBSEQUENT TO TH E ISSUE OF THE INTIMATION. IN OUR OPINION, THE MATERIAL WHICH IS AVAILABLE WITH THE AO EVEN ALONGWITH THE RETURN AT THE TIME OF THE PROCESSING OF THE RETURN CAN BE THE BASIS FOR REASON TO BELIEVE AS IN VIEW OF CLAUSE (B) OF EXPLANATION 2 IT CAN BE DEEME D THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. CLAUSE (B) OF EXPLANATION 2 DOES NOT REQUIRE THAT THE ASSESSMENT MUST PRECEDE BEFORE TAKING ANY ACTION U/S 147. 10.6 WE NOTED THAT THERE IS DECISION OF FULL BENCH OF THE HON'BLE DELHI HIGH COURT I N THE CASE OF CIT VS . USHA INTERNATIONAL LTD, 348 ITR 485 (DELHI) (FB) WHICH HAS TAKEN A VIEW CONTRARY TO THE DECISION OF ORIENT CRAFT LTD. ( SUPRA ), 354 ITR 536 (DEL.). EVEN THIS DECISION OF FULL BENCH HAS NOT BEEN REFERRED TO IN THE CASE OF ORIENT CRAFT LTD. ( SUPRA ). 10.7 WE NOTED THAT THE HON'BLE SUPREME COURT IN THE CASE OF RAYMOND WOLLEN MILLS LTD V S. ITO , 236 ITR 34 WHEN A SIMILAR QUESTION HAD COME BEFORE THE HON'BLE SUPREME COURT DID NOT DECIDE THE ISSUE WHETHER ANY NEW FACT CAME TO THE KNOWLEDGE OF THE ITO AFTER COMPLETING THE ASSESSMENT PROCEEDINGS. BUT THAT WAS NOT A CASE OF PROCESSING THE RETURN U/S 143(1). WE NOTED THAT THE HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI ( SUPRA ) HAS DISCUSSED THE PROVISIONS OF SEC. 143(1) AND 147 IN DETAIL AS WELL AS THE TERM REASON TO 21 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) BELIEVE AND HAS CATEGORICALLY HELD THAT WHERE THE RETURN IS PROCESSED U/S 143(1) THERE IS NO ASSESSMENT. 10.8 SEC. 147 HAS USED BOTH THE WORDS ASSESS OR REASSESS. THIS IMPLIES THAT THE AO HAS THE POWER EVEN TO MAKE AN ASSESSMENT WHERE EARLIER NO ASSESSMENT HAS BEEN MADE BY THE AO AND THERE IS ESCAPEMENT OF ASSESSMENT. WE CANNOT READ THE PROVISIONS OF SEC. 147 IN A MANNER THAT IT CAN BE APPLIED ONLY IN A CASE WHERE THE ASSESSMENT HAS ALREADY BEEN MADE. IN OUR VIEW, THE CASE OF THE ASSESSEE IS COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD., 291 ITR 500 ( SUPRA ) AS IN THAT CASE, THE AO HA D NOT MADE ANY ASSESSMENT AND HA D NOT FORMED ANY OPINION. THEREF ORE, ON THE BASIS OF THE MATERIAL WHICH IS AVAILABLE IN THE RETURN OR ALONGWITH THE RETURN WITH THE AO, THE AO, IN OUR OPINION, IN VIEW OF EXPLANATION 2(B) CAN TAKE ACTION U/S 147 IN A CASE WHERE THE RETURN HAS BEEN PROCESSED U/S 143(1). WE ARE BOUND TO F OLLOW THE DECISION OF THE HON'BLE SUPREME COURT. EVEN WE NOTED THAT THE DECISION OF THE HON'BLE DELHI HIGH COURT IS NOT BINDING PRECEDENTS ON US IN VIEW OF THE DECISION OF THE FULL BENCH OF HON'BLE DELHI HIGH COURT IN CIT VS . USHA INTERNATIONAL LTD, 348 I TR 485 (DELHI) (FB) ( SUPRA ). 11. ALTHOUGH , WE ARE OF THE OPINION THAT THE ISSUE IS DULY COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD., 291 ITR 500 ( SUPRA ) BUT STILL WE DECIDED TO GO THROUGH THE RELEVANT PROVISIONS FROM WHICH THE WORD TANGIBLE MATERIAL OR INFORMATION HAS BEEN INTERPRETED BY THE COURTS WHILE INTERPRETING THE PROVISIONS OF SEC. 147. 22 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) 11.1 WE NOTED THAT INITIALLY THE PROVISIONS FOR INCOME ES CAPING ASSESSMENT WERE BROUGHT INTO THE STATUTE BY WAY OF SEC. 34 INCORPORATED UNDER THE INCOME TAX ACT, 1922. THIS SECTION READS AS UNDER : 34. INCOME ESCAPING ASSESSMENT (1) IF - (A) THE INCOME - TAX OFFICER HAS REASON TO BELIEVE THAT BY REASON OF THE OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO MAKE A RETURN OF HIS INCOME UNDER SECTION 22 FOR ANY YEAR OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR, INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME - TAX HAV E ESCAPED ASSESSMENT FOR THAT YEAR, OR HAVE BEEN UNDER - ASSESSED OR ASSESSED AT TOO LOW A RATE, OR HAVE BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THE ACT, OR EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE HAS BEEN COMPUTED, OR (B) NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED IN CLAUSE (A) ON THE PART OF THE ASSESSEE, THE INCOME - TAX OFFICER HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME - TAX HAVE ESCAPED ASSESS MENT FOR ANY YEAR, OR HAVE BEEN UNDER - ASSESSED, OR ASSESSED AT TOO LOW A RATE, OR HAVE BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT, OR THAT EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE HAS BEEN COMPUTED, HE MAY IN CASES FALLING UNDER CLAUSE (A) A T ANY TIME 2 [* * *) AND IN CASES FALLING UNDER CLAUSE (B) AT ANY TIME WITHIN FOUR YEARS OF THE END OF THAT YEAR, SERVE ON THE ASSESSEE, OR, IF THE ASSESSEE IS A COMPANY, ON THE PRINCIPAL OFFICER THEREOF, A NOTICE CONTAINING ALL OR ANY OF THE REQUIREMENTS W HICH MAY BE INCLUDED IN A NOTICE UNDER SUB - SECTION (2) OF SECTION 22 AND MAY PROCEED TO ASSESS OR REASSESS SUCH INCOME, PROFITS OR GAINS OR RECOMPUTE THE LOSS OR DEPRECIATION ALLOWANCE; AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDIN GLY AS IF THE NOTICE WERE A NOTICE ISSUED UNDER THAT SUB - SECTION: 11.2 WE NOTED THAT SEC. 34 AUTHORISES THE AO TO TAKE ACTION FOR RE - ASSESSMENT UNDER TWO SITUATIONS; THE FIRST SITUATION IS GIVEN IN SEC. 34(1)(A) AND SECOND IS GIVEN IN SEC. 34(1)(B). SEC . 34(1)(A) EMPOWERS THE AO TO ASSESS OR RE - ASSESS THE ESCAPED INCOME, WHERE THE AO HAS REASON TO BELIEVE, DUE TO THE OMISSION OR FAILURE OF THE ASSESSEE TO MAKE A RETURN OF HIS INCOME U/S 22 OR TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY F OR HIS ASSESSMENT. U/S 34(1)(A) REASON TO BELIEVE IS QUALIFIED BY THE WORDS OMISSION OR FAILURE. SUB - CLAUSE (B) APPLIES TO A CASE WHERE THERE MAY BE NO OMISSION OR FAILURE BUT THE AO, IN 23 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) CONSEQUENCE OF INFORMATION IN HIS POSSESSION, HAS REASON TO BEL IEVE ABOUT THE ESCAPED INCOME. U/S 34(1)(B) THUS THE REASON TO BELIEVE FOR ESCAPEMENT OF THE INCOME MUST HAVE ARISEN IN CONSEQUENCE OF THE INFORMATION COMING IN THE POSSESSION OF THE AO. THE HON'BLE SUPREME COURT HAS ANALYSED THE WORD INFORMATION AS US ED IN SEC. 34(1)(B) IN THE CASE OF KALYANJI MAVJI A ND CO. VS CIT , 102 ITR 287 (SC) AND HAS CATEGORICALLY HELD IN THE FOLLOWING MANNER : THE WORD INFORMATION IN SECTION 34(1)(B) IS OF THE WIDEST AMPLITUDE AND COMPREHENDS A VARIETY OF FACTORS. NEVERTHE LESS, THE POWER UNDER SECTION 34(1)(B), HOWEVER WIDE IT MAY BE, IS NOT PLENARY BECAUSE THE DISCRETION OF THE INCOME - TAX OFFICER IS CONTROLLED BY THE WORDS REASON TO BELIEVE. INFORMATION MAY COME FROM EXTERNAL SOURCES OR EVEN FROM THE MATERIALS ALREADY O N RECORD OR MAY BE DERIVED FROM THE DISCOVERY OF NEW AND IMPORTANT MATTER OR FRESH FACTS. SECTION 34(1)(B) WOULD APPLY TO THE FOLLOWING CATEGORIES OF CASES : (1) WHERE THE INFORMATION IS AS TO THE TRUE AND CORRECT STATE OF THE LAW DERIVED FROM RELEVANT JUDICIAL DECISIONS; (2) WHERE IN THE ORIGINAL ASSESSMENT THE INCOME LIABLE TO TAX HAS ESCAPED ASSESSMENT DUE TO OVERSIGHT, INADVERTENCE OR A MISTAKE COMMITTED BY THE INCOME - TAX OFFICER; (3) WHERE THE INFORMATION IS DERIVED FROM AN EXTERNAL SOURCE OF AN Y KIND: SUCH EXTERNAL SOURCE WOULD INCLUDE DISCOVERY OF NEW AND IMPORTANT MATTERS OR KNOWLEDGE OF FRESH FACTS WHICH WERE NOT PRESENT AT THE TIME OF ORIGINAL ASSESSMENT; AND (4) WHERE THE INFORMATION MAY BE OBTAINED EVEN FROM THE RECORD OF THE ORIGINAL AS SESSMENT FROM AN INVESTIGATION OF THE MATERIALS ON THE RECORD OR THE FACTS DISCLOSED THEREBY OR FROM OTHER ENQUIRY OR RESEARCH INTO FACTS OR LAW. WHERE, HOWEVER, THE INCOME - TAX OFFICER GETS NO SUBSEQUENT INFORMATION, BUT MERELY PROCEEDS TO REOPEN THE ASS ESSMENT WITHOUT ANY FRESH FACTS OR MATERIALS OR WITHOUT ANY ENQUIRY INTO THE MATERIALS WHICH FORM PART OF THE ORIGINAL ASSESSMENT, SECTION 34(1)(B) WOULD HAVE NO APPLICATION. 11.3 FROM THE AFORESAID JUDGEMENT , WE NOTED THAT THE HON'BLE COURT HAS INTERPRE TED THAT THE WORD SUBSEQUENT INFORMATION REQUIRES FRESH FACTS AND MATERIAL OR IF THERE ARE EXISTING FACTS, THEN, THERE MUST BE ENQUIRY INTO THE MATERIALS AVAILABLE. THUS, WE NOTED THAT REQUIREMENT OF FRESH MATERIAL OR FACTS 24 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) HAS BEEN INTERPRETED BY THE C OURT BECAUSE SEC. 34(1)(B) STATES THAT THE AO HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE. REASON TO BELIEVE SHOULD HAVE ARISEN IN CONSEQUENCE OF THE INFORMATION AND AS THE INFORMATION CANNOT BE BASED WITHOUT MATERIAL OR FACTS, THEREFORE, IT HAS BEEN INTERPRETED BY THE COURT THAT THERE MUST BE FRESH FACTS OR TANGIBLE MATERIAL WITH THE AO. WE NOTED THAT IN SEC. 147, AS WAS IN EXISTENCE PRIOR TO 1.4.1989, UNDER SUB - CLAUSE (B) SIMILAR LANGUAGE HAS BEEN USED AS HAD BEEN USED IN SEC. 34(1)(B). FOR READY REFERENCE THE SAID SECTION 147 AS WAS IN EXISTENCE PRIOR TO 1.4.1989 IS REPRODUCED AS UNDER : - 147. IF (A) THE INCOME - TAX OFFICER HAS REASON TO BELIEVE THAT, BY REASON OF THE OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO MAKE A RETURN UNDER SECTION 139 FOR ANY ASSESSMENT YEAR TO THE INCOME - TAX OFFICER OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESS ARY FOR HIS ASSESSMENT FOR THAT YEAR, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT YEAR, OR (B) NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED IN CLAUSE (A) ON THE PART OF THE ASSESSEE, THE INCOME - TAX OFFICER HAS IN CO NSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME OR RECOMPUTE THE LOSS OR TH E DEPRECIATION ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR). 11.4 IN THIS SECTION ALSO, FOR THE PURPOSE OF REASON TO BELIEVE IT IS NECESSARY THAT THE REA SON TO BELIEVE MUST HAVE ARISEN IN CONSEQUENCE OF THE INFORMATION IN THE POSSESSION OF THE AO. THE INFORMATION MUST PRECEDE THE REASONS TO BELIEVE IF WE READ THE PROVISIONS OF SEC.147(B). WE NOTED THAT THE HON'BLE SUPREME COURT HAD OCCASION TO INTERPRET T HE WORD INFORMATION AS USED IN SEC. 147(B) IN THE CASE OF CIT VS. A. RAMAN & CO., 67 ITR 011(SC) AS REPRODUCED BELOW : - THE EXPRESSION INFORMATION IN THE CONTEXT IN WHICH IT OCCURS [IN SECTION 147(B) OF THE INCOME - TAX ACT, 1961] MUST MEAN INSTRUCTION OR KNOWLEDGE DERIVED FROM AN 25 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) EXTERNAL SOURCE CONCERNING FACTS OR PARTICULARS, OR AS TO LAW RELATING TO A MATTER BEARING ON THE ASSESSMENT. TO COMMENCE THE PROCEEDINGS FOR REASSESSMENT IT IS NOT NECESSARY THAT ON THE MATERIALS WHICH CAME TO THE NOTICE OF THE INCOME - TAX OFFICER, THE PREVIOUS ORDER OF ASSESSMENT WAS VITIATED BY SOME ERROR OF FACT OR LAW. THE HIGH COURT EXERCISI NG JURISDICTION UNDER ARTICLE 226 OF THE CONSTITUTION HAS POWER TO SET ASIDE A NOTICE ISSUED UNDER SECTION 147(B) OF THE INCOME - TAX ACT, 1961, IF THE CONDITION PRECEDENT TO THE EXERCISE OF THE JURISDICTION DOES NOT EXIST. THE COURT MAY, IN EXERCISE OF ITS POWERS, ASCERTAIN WHETHER THE INCOME - TAX OFFICER HAD IN HIS POSSESSION ANY INFORMATION: THE COURT MAY ALSO DETERMINE WHETHER FROM THE INFORMATION THE INCOME - TAX OFFICER MAY HAVE REASON TO BELIEVE THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. BUT T HE JURISDICTION OF THE COURT EXTENDS NO FURTHER. WHETHER ON THE INFORMATION IN HIS POSSESSION, HE SHOULD COMMENCE PROCEEDINGS FOR ASSESSMENT OR REASSESSMENT, MUST BE DECIDED BY THE INCOME - TAX OFFICER AND NOT BY THE HIGH COURT. THE INCOME - TAX OFFICER ALON E IS ENTRUSTED WITH THE POWER TO ADMINISTER THE ACT: IF HE HAS INFORMATION FROM WHICH IT MAY BE SAID, PRIMA FACIE, THAT HE HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, IT IS NOT OPEN TO THE HIGH COURT EXERCISING POWERS UNDER ARTICLE 226 OF THE CONSTITUTION TO SET ASIDE OR VACATE THE NOTICE FOR REASSESSMENT ON A REAPPRAISAL OF THE EVIDENCE. IN A PETITION UNDER ARTICLE 226 OF THE CONSTITUTION, THE TAXPAYER MAY CHALLENGE THE VALIDITY OF A NOTICE UNDER SECTION 147 OF THE INCOME - T AX ACT, 1961, ON THE GROUND THAT EITHER OF THE CONDITIONS PRECEDENT DOES NOT EXIST, BUT AN INVESTIGATION WHETHER THE INFERENCES RAISED BY THE INCOME - TAX OFFICER ARE CORRECT OR PROPER CANNOT BE MADE. JURISDICTION OF THE INCOME - TAX OFFICER TO REASSESS INCOME ARISES IF HE HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THAT INFORMATION MUST, IT IS TRUE, HAVE COME INTO THE POSSESSION OF THE INCOME - TAX OFFICE AFTER THE PREVIOUS AS SESSMENT, BUT EVEN IF THE INFORMATION BE SUCH THAT IT COULD HAVE BEEN OBTAINED DURING THE PREVIOUS ASSESSMENT FROM AN INVESTIGATION OF THE MATERIAL ON RECORD, OR THE FACTS DISCLOSED THEREBY, OR FROM OTHER ENQUIRY OR RESEARCH INTO FACTS OR LAW, BUT WAS NOT IN FACT OBTAINED, THE JURISDICTION OF THE INCOME - TAX OFFICER IS NOT AFFECTED. 11.5 FROM THE PROVISIONS OF SEC. 34(1)(B) AND 147(B) WHICH WERE UNDER THE INCOME TAX ACT PRIOR TO 1.4.1989 IT IS APPARENT THAT FOR ARRIVING AT REASON TO BELIEVE THAT INCOME C HARGEABLE TO TAX HAS ESCAPED ASSESSMENT IT WAS NECESSARY 26 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) THAT THE AO MUST HAVE INFORMATION IN HIS POSSESSION PRIOR TO ARRIVING AT REASONS TO BELIEVE T HAT INCOME ESCAPED ASSESSMENT. THIS INFORMATION HAS BEEN INTERPRETED BY THE COURTS FROM TIME TO TIME IN TH E FORM OF TANGIBLE FRESH MATERIAL OR FACTS BUT WHEN WE LOOKED INTO THE PROVISIONS OF SEC. 147 WHICH HAS BEEN SUBSTITUTED W.E.F. 1.4.1989, WE NOTED THAT THERE ARE DRASTIC CHANGES IN THIS SECTION. NOW, THE ONLY CONDITION WHICH REQUIRES TO BE FULFILLED IS TH AT THE AO MUST HAVE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THIS SECTION DOES NOT TALK THAT REASON TO BELIEVE MUST BE BASED OR MUST HAVE BEEN IN CONSEQUENCE OF INFORMATION COMING INTO THE POSSESSION OF THE AO . T HER EFORE, IN OUR OPINION, FOR TAKING ACTION U/S 147 THE REASON TO BELIEVE CAN BE BASED ON THE BASIS OF THE MATERIAL AVAILABLE WITH THE AO ON THE BASIS OF THE RETURN FILED BY THE ASSESSEE. R EQUIREMENT OF NEW MATERIAL OR FRESH TANGIBLE MATERIAL COMING IN THE POSSESSION OF THE AO AS A PRE - REQUISITE CONDITION FOR RE - ASSESSMENT IS APPLICABLE ONLY WHERE HE HAD MADE AN ASSESSMENT EARLIER. THIS WILL NOT BE APPLICABLE IF NO ASSESSMENT WAS ORIGINALLY MADE AND AO IS GOING TO PROCEED WITH ASSESSMENT U/S 147 FOR THE FI RST TIME. IT MAY ALSO BE NOTED THAT SEC.147 DOES NOT DEAL ONLY WITH THE CASES OF RE - ASSESSMENT BUT ALSO WITH THE ASSESSMENT FOR THE FIRST TIME. THE COURTS HAVE FROM TIME TO TIME INTERPRETED THE WORD REASON TO BELIEVE TO MEAN THAT THE AO MUST HAVE CAUSE OR JUSTIFICATION. AT THE STAGE OF INITIATION OF THE PROCEEDINGS IT IS NOT REQUIRED THAT THE AO MUST ESTABLISH THE ESCAPEMENT OF THE INCOME. THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED THE REQUI SITE BELIEF. THE SCOPE AND EFFECT OF SEC.147 AS SUBSTITUTED W.E.F. 1.4.1989 IS SUBSTANTIALLY DIFFERENT FROM THE PROVISIONS AS STOOD PRIOR TO SUCH SUBSTITUTION. THE COURT HAS INTERPRETED FROM TIME TO TIME THAT THERE MUST BE BONA FIDE REASON TO BELIEVE. W HERE THE AO HAS APPLIED HIS MIND TO THE MATERIAL AVAILABLE WITH HIM, HE CANNOT BE PERMITTED TO REVIEW THE ASSESSMENT IN THE GARB OF REASON TO BELIEVE. THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. 27 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) RAJESH JHAVERI STOCK BROKERS PVT. LTD., 291 ITR 500 ( SUPRA ) HAS CATEGORICALLY TAKEN THE VIEW AT PG. 509 THAT THE INTIMATION U/S 143(1) CANNOT BE TREATED TO BE AN ORDER OF ASSESSMENT. THE AO IS BOUND TO ACCEPT THE RETURN AS HAS BEEN FILED BY THE ASSESSEE AND PROCESS IT. SINCE THE AO IS BOUND TO PROCESS THE RETURN WITHOUT MAKING ANY ADDITION THEREON, NO QUESTION OF APPLICATION OF MIND BY THE AO ARISES. THEREFORE, IT CANNOT BE SAID THAT THE AO HAS APPLIED HIS MIND AND IF THE AO IS TAKING ACTION U/S 147 ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD FOR ESC APEMENT OF THE INCOME AS PER THE DEFINITION GIVEN UNDER EXPLANATION 2(B), IN OUR OPINION, IT CANNOT BE SAID THAT SUCH AN ACTION IS ILLEGAL AND WITHOUT JURISDICTION. THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD., 291 ITR 500 ( SUPRA ) FURTHER HELD THAT THERE BEING NO ASSESSMENT U/S 143(1) OF THE ACT, THE QUESTION OF CHANGE OF OPINION DOES NOT ARISE. THE HON'BLE SUPREME COURT ALSO HELD THAT SEC. 147 PERMITTED THE AO TO ASSESS OR RE - ASSESS THE INCOME CHARGEABLE TO TAX WHEN HE HAS REASON TO BELIEVE INCOME ESCAPING ASSESSMENT. THE MERE FAILURE TO TAKE STEPS U/S 143(3) WOULD NOT RENDER THE AO POWERLESS TO INITIATE PROCEEDINGS U/S 147 OF THE ACT EVEN WHEN INTIMATION U/S 143(1) HAD BEEN ISSUED. THUS, WITH THE AMENDMENT BR OUGHT TO SEC. 147 OF THE ACT ON AND FROM 1.4.1989 AND THE ELUCIDATION ON THE SCOPE OF THE AUTHORITY AND JURISDICTION OF THE OFFICER U/S 147 OF THE ACT, WE ARE OF THE FIRM VIEW THAT THE PROCEEDINGS INITIATED BY THE AO U/S 147 ARE VALID AND THE AO COULD HAVE TAKEN THE ACTION U/S 147 ON THE BASIS OF THE MATERIAL AVAILABLE AND FILED ALONGWITH THE RETURN. THERE IS NO NEED OF ANY FRESH TANGIBLE MATERIAL FOR COMING TO THE REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT IN VIEW OF EXPLANATION 2 CLAUSE ( B) OF SEC. 147. 12. WE HAVE GONE THROUGH THE VARIOUS CASE LAWS AS HAS BEEN RELIED ON BY THE LD. AR. IN THE CASE OF CIT VS. VARSHA GOYAL, 319 ITR 92 (P&H) ( SUPRA ) WE NOTED THAT EVEN THOUGH THE RETURN WAS PROCESSED U/S 143(1 )(A ), PROCEEDINGS WERE 28 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) INITIATED U/S 147. THE ASSESSEE CHALLENGED THE INITIATION OF THE PROCEEDINGS . WHEN THE MATTER WENT BEFORE THE HON'BLE HIGH COURT, THE HON'BLE HIGH COURT NOTED THAT THE AO HAS NOT SPECIFIED WHAT ITEMS OF JEWELLERY AND WHICH SHARE CERTIFICATES WERE NOT REC ORDED IN THE BOOKS OF ACCOUNTS . T HEREFORE, THE HON'BLE HIGH COURT TOOK THE VIEW THAT THE REASONS WERE NOT BONA FIDE RE LYING ON TH E DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ITO VS. LAKHAMANI MEWAL DAS , 103 ITR 437. THE DECISION OF THE HON'BLE SUPREME COURT EVEN THOUGH WAS RENDERED ON 23.5.2007 BUT THE HON'BLE HIGH COURT COULD NOT LOOK INTO THAT DECISION AS THE HON'BLE HIGH COURT DECIDED THE ISSUE ON 18.7.2007. THIS DECISION, IN OUR OPINION DOES NOT SUPPORT THE SUBMISSION OF THE LD. AR THAT THE AO REQUIRES FRESH MATERIAL BEFORE INITIATING PROCEEDINGS U/S 147 IN CASE THE RETURN IS PROCESSED U/S 143(1). COMING TO THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF INDUCTOTHERM (INDIA) (P.) LTD. VS. DCIT, 356 ITR 481 ( SUPRA ) , WE NOTED THAT IN THIS CASE ALSO THE HON'BLE HIGH COURT TOOK THE VIEW THAT IF INTIMATION U/S 143(1) WAS ISSUED AND SCRUTINY ASSESSMENT U/S 143(3) WAS NOT DONE, ASSESSMENT COULD BE RE - OPENED IF THERE WAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THIS DECISION, THEREFORE, WILL NOT APPLY TO THE FACT S OF THE CASE OF THE ASSESSEE AS IT IS NOT A GROUND IN THE CASE OF THE ASSESSEE THAT THE AO WAS NOT HAVING REASON TO BELIEVE. IN THE CASE OF INDIVEST PTE LTD. VS. ADDL. DIT , 350 I TR 120 (BOM) ( SUPRA ) , WE NOTED THAT THE HON'BLE HIGH COURT HAS HELD THAT THE AO HAS POWER TO REOPEN THE ASSESSMENT PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. THE REASONS MUST HAVE A LI VE LINK WITH THE FORMATION OF THE BELIEF. THE VALIDITY OF THE NOTICE REOPENING THE ASSESSMENT U/S 148 OF THE ACT HAS TO BE DETERMINED ON THE BASIS OF THE REASONS WHICH ARE DISCLOSED TO THE ASSESSEE. THOSE REASONS CONSTITUTE THE FOUNDATION OF THE ACTION I NITIATED BY THE AO FOR REOPENING THE ASSESSMENT. THOSE REASONS CANNOT BE SUPPLEMENTED OR IMPROVED UPON SUBSEQUENTLY. IN THIS DECISION ALSO, THE 29 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) HON'BLE HIGH COURT NOWHERE MENTIONED THAT THE AO SHOULD HAVE FRESH MATERIAL FOR REOPENING THE ASSESSMENT AS HA S BEEN ARGUED BY THE LD. AR. THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SMT. MANIBEN VALIJI SHAH, 283 ITR 453 (BOM) ( SUPRA ) WILL ALSO, IN OUR OPINION, NOT HELP THE ASSESSEE. IN THIS CASE, THE HON'BLE HIGH COURT TOOK THE VIEW THAT THE BELIEF ENTERTAINED BY THE ITO MUST NOT BE ARBITRARY OR IRRATIONAL. IT MUST BE REASONABLE OR IN OTHER WORDS, IT MUST BE BASED ON REASONS WHICH ARE RELEVANT AND MATERIAL. THE COURT CANNOT INVESTIGATE INTO THE ADEQUACY OR SUFFICIENCY OF THE REASONS. THIS DECISION HAS ALSO BEEN RENDERED ON 14.2.2005 , PRIOR TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RAJESH JHAVERI STOCK BRO KERS PVT. LTD., 291 ITR 500 (SC) ( SUPRA ) . THIS DECISION NOWHERE TALKS THAT FRESH MATERIAL IS REQUIRED FOR REOPENING THE ASSESSMENT FRAMED U/S 143(1). IN CASE OF BALKRISHNA HIRALAL WANI VS. ITO, 321 ITR 519 (BOM) ( SUPRA ) WE NOTED THAT THE HON'BLE BOMBAY H IGH COURT TOOK THE VIEW THAT THERE WAS NO TANGIBLE MATERIAL BEFORE THE AO TO FORM THE CONCLUSION THAT INCOME HAD ESCAPED ASSESSMENT. THIS DECISION ALSO DOES NOT TALK OF THAT FRESH MATERIAL IS REQUIRED BEFORE REOPENING OF ASSESSMENT. WE HAVE ALSO GONE THR OUGH THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PRASHANT S. JOSHI & ANR. VS. ITO, 324 ITR 154 ( SUPRA ). IN THIS DECISION ALSO, WE NOTED THAT THE HON'BLE HIGH COURT TOOK THE VIEW THAT ONLY REASONS RECORDED BY THE AO HAS TO BE CONSIDERED I.E. BONA FIDE OF THE REASONS HAVE TO BE LOOKED INTO. THIS DECISION ALSO, IN OUR OPINION, WILL NOT BE APPLICABLE TO THE FACTS BEFORE US AND THIS DECISION ALSO NOWHERE REQUIRES THAT THERE MUST BE FRESH MATERIAL TO BE BROUGHT ON RECORD BY THE AO. IN THE CASE OF CIT VS. BATRA BHATTA COMPANY, 321 ITR 526 (DEL) WE NOTED THAT THE ASSESSMENT HAS BEEN REOPENED BY THE AO MERELY ON THE BASIS THAT THE CLAIM OF THE ASSESSEE REQUIRES MUCH DEEPER SCRUTINY. IN VIEW OF THIS, THE HON'BLE HIGH COURT TOOK THE VIEW THAT THIS CANNOT BE THE BASIS FOR REASON TO BELIEVE. THIS DECISION, THEREFORE, WILL NOT ASSIST THE ASSESSEE. 30 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) 12.1 IN VIEW OF THE AFORESAID DISCUSS ION, WE DISMISS THE GROUND TAKEN BY THE ASSESSEE IN ALL CROSS OBJECTIONS THAT THE PROCEEDINGS INITIATED U/S 147 ARE INVALID. THUS, GROUND NOS. 1 TO 3 STANDS DISMISSED. 13 . SO FAR AS GROUND NO. 4 IN THE CROSS OBJECTION IS CONCERNED, WE NOTED THAT THIS GROUND WAS TAKEN BY THE ASSESSEE BEFORE THE CIT(A) STATING THAT THE AO ERRED IN ADOPTING THE FAIR MARKET VALUE OF THE AGRICULTURAL LAND SOLD DURING THE YEAR AS ON 1.4.1981 @ RS. 5/SQ. MTR. AFTER HEARING THE RIVAL SUBMISSIONS AND CAREFU LLY CONSIDERING THE SAME, WE NOTED THAT THIS GROUND HAS NOT BEEN EXAMINED AND ADJUDICATED BY THE CIT(A). WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE CIT(A) WITH DIRECTION THAT THE CIT(A) SHOULD GIVE A FINDING ON THIS ISSUE AFTER GIVING PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE. THUS, THIS GROUND STANDS ALLOWED FOR STATISTICAL PURPOSE. 14 . GROUND NO. 5 IN THE CROSS OBJECTION RELATES TO THE CLAIM OF DEDUCTION BY THE ASSESSEE WHILE COMPUTING CAPITAL GAINS FOR THE BROKERAGE INCURRED BY HIM. WE NOTED THAT THIS GROUND HAS ALSO NOT BEEN ADJUDICATED BY THE CIT(A). AFTER HEARING THE RIVAL SUBMISSI ONS AND CAREFULLY CONSIDERING THE SAME, WE RESTORE THIS GROUND ALSO TO THE FILE OF CIT(A) WITH THE DIRECTION THAT CIT(A) WILL ADJUDICATE THIS GROUND BY PASSING A SPEAKING ORDER AND AFTER GIVING PROPER AND SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. THE AS SESSEE IS ALSO DIRECTED TO CO - OPERATE WITH THE CIT(A) IN PRODUCING THE EVIDENCE FOR SUBSTANTIATING HIS CLAIM. THUS, THIS GROUND ALSO STANDS ALLOWED FOR STATISTICAL PURPOSE. 15 . IN REVENUES APPEAL, WE NOTED THAT IN ALL THE GROUNDS THE COMMON ISSUE IS WH ETHER THE ASSESSEE IS LIABLE TO CAPITAL GAINS ON THE SALE OF THE LAND SITUATED 31 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) AT LOLIEM, CANACONA, GOA SITUATED IN THE VILLAGE PANCHAYAT AND WHETHER THE LAND IS A CAPITAL ASSET AS PER PROVISIONS OF SEC. 2(14) OF THE INCOME TAX ACT . 15 .1 THE BRIEF FACTS RELATING TO THIS ISSUE ARE THAT THE AO NOTED FROM THE RETURN FILED BY THE ASSESSEE THAT THERE WAS A NOTE THAT THE ASSESSEE HAS RECEIVED HIS SHARE ON THE SALE OF AGRICULTURAL LAND SITUATED WITHIN THE LIMITS OF VILLAGE PANCHAYAT AT LOLIEM IN CANACONA, TAL. S OUTH GOA OUT OF TOTAL SALE CONSIDERATION OF RS.16,34,24,748/ - . THE AO ALSO NOTED THAT SIMILAR SALE CONSIDERATION HAS BEEN RECEIVED IN 5 OTHER CASES, THEREFORE, THE AO RE - OPENED THE CASE TO BRING TO TAX THE ESCAPED INCOME OF CAPITAL GAINS AS THE ASSESSEE H AS NOT DECLARED THE SAID INCOME EITHER AS A CAPITAL GAINS OR BUSINESS INCOME. THE ASSESSEE MENTIONED THAT THE SALE PROCEEDS RECEIVED FROM SALE OF THE AGRICULTURAL LAND IS NOT A CAPITAL ASSET U/S 2(14) AS IT IS SITUATED BEYOND 8 KMS. FROM THE LOCAL LIMITS OF THE MUNICIPALITY. IN RESPONSE TO NOTICE ISSUED U/S 148, THE ASSESSEE SUBMITTED THAT THE ORIGINAL RETURN FILED MAY BE TAKEN AS RETURN FILED IN RESPONSE TO NOTICE U/S 148. THE ASSESSEE ASKED FOR COPY OF THE REASONS RECORDED AND THEREUPON THE ASSESSEE SU BMITTED THE OBJECTI ONS. THE AO DISPOSED OFF THE OBJECTIONS. THE ASSESSEE BEFORE THE AO SUBMITTED THAT THE SAID LAND SOLD IS AN AGRICULTURAL PROPERTY WHICH IS NEITHER LOCATED IN ANY MUNICIPALITY NOR SITUATED WITHIN 8 KMS. FROM ANY NOTIFIED MUNICIPALITY, TH EREFORE, IT CANNOT BE CONSIDERED AS PER SEC. 2(14) TO BE A CAPITAL ASSET. REFERENCE WAS MADE TO FORM I & XIV ISSUED BY THE GOVERNMENT AND AS PER THAT IT WAS SUBMITTED THAT THE LAND COMES UNDER THE CATEGORY OF AGRICULTURAL LAND. THE ASSESSEE ALSO POINTED OUT THAT THE MARKET VALUE AS ON 1.4.1981 WAS NOT LESS THAN RS.50/SQ.MTRS. AND THE ASSESSEE HAS PAID BROKERAGE OF RS. 56 LACS TO ONE TAPAN ACHARYA WHO FINALISED THE ABOVE SALE WITH THE PURCHASER OF THE LAND. IT WAS ALSO STATED THAT THE ASSESSEE AND HIS WIF E INVESTED RS. 50 LACS EACH IN REC CAPITAL GAINS BONDS WHICH ARE ELIGIBLE FOR EXEMPTION U/S 54EC OF THE INCOME TAX ACT BUT THE EXEMPTION U/S 54EC AND 32 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) THE BROKERAGE PAID FOR THE SALE OF THE LAND WAS NOT CLAIMED AS DEDUCTION AS THE ASSESSEE WAS OF THE VIEW T HAT THE LAND SOLD WAS NOT A CAPITAL ASSET. THE ASSESSEE ALSO SUBMITTED A COPY OF THE RECEIPT ISSUED BY THE BROKER AND TRUE COPY OF THE BOND ALLOTMENT CERTIFICATE ELIGIBLE FOR EXEMPTION U/S 54EC. THE ASSESSEE ALSO RELIED ON THE FOLLOWING CASE LAWS : I) RASIKLAL CHIMANLAL NAGRI VS. CWT, 56 ITR 608 (GUJ.) II) TEA ESTATE S INDIA (P) LTD. VS. CWT, 59 ITR 428 (CAL.) III) SMT. MANYAM MEENAKSHAMMA VS. CWT, 63 ITR 534 (AP) IV) VENUGOPAL VARMA RAJAH VS. CED, 64 ITR 358 (KER) V) CWT VS. OFFICER - IN - CHARGE (COURT OF WARDS), 105 ITR 133 (SC) THE AO DEPUTED AN INSPECTOR TO VERIFY THE LAND. THE INSPECTOR SUBMITTED HIS REPORT DT. 16.12.2010 WHICH READS AS UNDER : WE MET SHRI SANDEEP DESAI, SECRETARY OF THE LOILEM PANCHAYAT AT AROUND 1.00 P.M. ON 15.12.2010 AND REQUES TED HIM TO HELP US IN IDENTIFYING THE PROPERTY BEARING SURVEY NO. 352, SUB. DIVISION NO. 1 KNOWN AS VATTORIANT OR VADTURY OR VATOREIN MEASURING 2,18,250 SQ. MTRS. WITHIN THE LIMITS OF VILLAGE PANCHAYAT OF LOILEM IN CANACONA TALUKA OF SOUTH GOA DISTRI CT. THE SECRETARY, LOILEM PANCHAYAT SENT ALONGWITH THE TALATHI. THE ABOVE PROPERTY IS BOUNDED ON THE SOUTHERN SIDE BY A RIVULET WHICH JOINS THE ARABIAN SEA. ON THE WESTERN SIDE OF THE PROPERTY IS ARABIAN SEA. THE ENTIRE PROPERTY IS ROCKY & HILLY AREA. WE COULD SEE WILD GROWN TREES AND THICK BUSHES WHICH APPEAR TO BE NATURALLY GROWN SINCE MANY DECADES. THERE WAS NO EASY ACCESS TO GO DEEP INSIDE THE PROPERTY TO FIND OUT WHETHER ANY AGRICULTURAL ACTIVITY OPERATION IS BEING CARRIED OUT OR NOT. THE SECUR ITY GUARDS STATED THAT THERE ARE NO LABOURERS WHICH ARE ENGAGED IN AGRICULTURE IN THE SAID PREMISES AND THEY HAVE BEEN POSTED JUST TO WATCH NO THEFT OF VALUABLE TREES LIKE TEAK ETC. TAKES PLACE. THE ABOVE PROPERTY IS WITHIN THE LIMITS OF LOILEM VILLAGE PA NCHAYAT AND AROUND 15 KMS. FROM THE CANACONA MUNICIPAL LIMITS. 15.2 ON THE BASIS OF THE REPORT THE AO TOOK THE VIEW THAT ON THE CAPTIONED LAND NO AGRICULTURAL OPERATIONS ARE BEING CARRIED OUT AND HE TOOK THE VIEW THAT ASSESSEE HAS TO PROVE THAT THE LAND WAS IN A CULTIVABLE STATE. RELIANCE WAS 33 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) PLACED ON THE DECISION OF TEA ESTATE INDIA PVT. LTD. ( SUPRA ), 59 ITR 428 (CAL.) WHEREIN IT WAS HELD THAT A GRICULTURAL LAND SHOULD COMPRISE OF FOLLOWING CHARACTERISTICS : I) IT MUST BE A LAND; II) IT MUST PERTAIN TO OR BE CONNECTED WITH CULTIVATION; III) IT MUST INVOLVE EXPENDITURE OF HUMAN LABOUR AND SKILL FOR THE PURPOSE OF CULTIVATION OR FOR KEEPING IT IN A CULTIVABLE STATE. 15.3 AO TOOK THE VIEW THAT THE LAND SOLD IN QUESTION CANNOT BE REGARDED TO BE AGRICULTURAL LAND. IT WAS ALSO HELD THAT IN THE SALE DEED IT IS NOT MENTIONED THAT THE PROPERTY SOLD IS AN AGRICULTURAL LAND. REFERRING TO THE EXTRACT OF FORM I & XIV FURNISHED BY THE SUB - REGISTRAR HE NOTED THAT IN THESE FORMS DETAILS OF CROPPED AREA IS MENTIONED AS NIL AND THERE IS NO MENTION OF AGRICULTURAL ACTIVITY CARRIED ON. ULTIMATELY, THE AO TOOK THE VIEW THAT THE CAPTIONED LAND IS A CAPITAL ASSET WITHIN THE MEANING OF SEC. 2(14) AND IS NOT AN AGRICULTURAL LAND. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) . THE CIT(A) CALLED FOR THE REMAND REPORT OF THE AO AND ULTIMATELY TOOK THE VIEW THAT THE CAPTIONED LAND IS AN AGRICULTURAL LAND BY HOLDING AS UNDER AND DELETING THE ADDITION MADE BY THE AO AS CAPITAL GAINS ARISING ON THE SALE OF AGRICULTURAL LAND : 5.6 I HAVE GONE THROUGH THE REASONING OF THE A.O. AND SUBMISSIONS OF THE APPELLANT AND HAVE PERUSED DETAILS AND DOCUMENTS, WHICH ARE RELEVANT IN THE FACTS OF THE INSTANT CASE. I HAVE ALSO GONE THROUGH THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE AO AND THE LEARNED COUNSEL OF THE APPELLANT. IN MY OPINION, THE INSTANT CASE IS MORE A CASE OF FACTS THAN LAW. THERE IS NO DENYING THE FACT THAT EVEN AFTER 4 YEARS OF SALE, SEVERAL FRUITS BEARING TREES EXISTED ON THE PROPERTY AND NO DEVELOPMENTAL WORK RELATING T O INFRASTRUCTURE WAS CARRIED TILL DATE. DOCUMENTS LIKE FORM I AND FORM XIV AND THE CERTIFICATE DATED 07.12.2010 ISSUED BY THE ZONAL AGRICULTURAL OFFICER. CANCONA - GOA PROVED THAT THE LAND SOLD BY THE APPELLANT WAS AN AGRICULTURAL LAND WHICH CANNOT BE CONSI DERED AS A CAPITAL ASSET. IT IS ALSO PROVED THROUGH VERIFICATION THAT THE CHARACTER OF THE LAND HAS NOT CHANGED EVEN AFTER BEING SOLD TO INFRASTRUCTURE COMPANY. MOREOVER, THE JUDGEMENT OF THE JURISDICTION MUMBAI HIGH COURT IN THE CASE OF CIT VS. MINGUEL CHANDRA PAIS REPORTED 282 ITR 618, SQUARELY COVERS THE FACT AND LAW IN THE INSTANT CASE, WHEREIN THE JURISDICTIONAL HIGH COURT DECIDED AS UNDER : 34 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) THE AO HAS NOTED THAT THE SAID LAND WAS ENTERED IN THE REVENUE RECORD AS AN AGRICULTURAL LAND I.E. GARDEN OR ORCHARD. IT IS CONTENDED BY THE REVENUE THAT THE LAND WAS NOT ACTUALLY USED FOR AGRICULTURE IN AS MUCH AS NO AGRICULTURAL INCOME WAS DERIVED FROM THIS LAND AND WAS NOT SHOWN BY THE RESPONDENTS IN THEIR INCOME TAX RETURN. THIS WAS EXPLAINED BY SAYING THAT THERE WERE COCONUT TREES IN THE LAND BUT THE AGRICULTURAL INCOME DERIVED BY SALE OF COCONUT WAS JUST ENOUGH TO MAINTAIN THE LAND AND THERE WAS NO ACTUAL SURPLUS, HENCE, NO AGRICULTURAL INCOME WAS SHOWN FROM THIS LAND. IN OUR OPINION, IF AN AGRICULTURAL O PERATION DOES NOT RESULT IN GENERATION OF SURPLUS THAT CANNOT BE A GROUND TO SAY THAT THE LAND WAS NOT USED FOR THE AGRICULTURAL PURPOSE. IT IS NOT DISPUTED THAT THE LAND WAS SHOWN IN THE REVENUE RECORD TO BE USED FOR AGRICULTURAL PURPOSE AND NO PERMISSIO N WAS EVER OBTAINED FOR NON - AGRICULTURAL USE BY THE RESPONDENTS. 6. SINCE THE FACTS OF THIS CASE ARE IDENTICAL TO THAT OF CIT VS. SMT. DEBBIE ALEMAO & CIT VS. MINGUEL CHANDRA PIAS RESPECTFULLY FOLLOWING THE JUDGEMENT OF THE JURISDICTIONAL BOMBAY HIGH COURT, THE AO IS DIRECTED TO DELETE THE ADDITION MADE AS CAPITAL GAINS ARISING ON SALE OF AGRICULTURAL LAND AND THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED. 7. IN VIEW OF THE ABOVE, OTHER GROUNDS OF APPEAL OF THE APPELLANT BECOME INFRUCTOUS AND THER EFORE, THEY ARE NOT BEING ADJUDICATED UPON. FOR STATISTICAL PURPOSES, THE APPEAL IS ALLOWED. 16. THE LD. AR BEFORE US VEHEMENTLY CONTENDED THAT THE LAND SOLD BY THE ASSESSEE IS AN AGRICULTURAL LAND AND THEREFORE IT IS NOT A CAPITAL ASSET WITHIN THE MEA NING OF SEC. 2(14) OF THE ACT. FOR THIS OUR ATTENTION WAS DRAWN TO SEC. 2(14) AND PG. 271 - 272 OF THE PAPER BOOK CONSISTING OF COPY OF FORM I & XIV ISSUED BY THE OFFICER IN - CHARGE, LAND RECORDS AND IT WAS SUBMITTED THAT THIS FORM CERTIFIED THAT THE DRY CROP AREA IS 2,18,250 SQ. MTRS. THE SAID CERTIFICATE FURTHER STATES THAT THE CROPPED AREA IS NIL. ATTENTION WAS DRAWN TO PG. 273 OF THE PAPER BOOK WHICH CONSISTS OF CERTIFICATE ISSUED BY THE ZONAL AGRICU LTURAL OFFICER, CANACONA, GOA. IT WAS SUBMITTED THAT T HE ZONAL AGRICULTURAL OFFICER, CANACONA , GOA VIDE CERTIFICATE DT. 7.12.2010 CERTIFIED ON INSPECTION OF THE SAID LAND THAT IT IS REGISTERED AS AGRICULTURAL LAND AND DRY TREES LIKE CASHEW, MANGO, JACKFRUIT, 35 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) COCUM AND COCONUTS ETC. ARE EXISTING WHICH ARE MORE THA N 20 YEARS OLD. THE INSPECTORS OF TWO DIFFERENT ASSESSEES WHO VISITED THE LAND UNDER CONSIDERATION IN THEIR REPORTS DT. 16.12.2010 AND 19.10.2011 STATED THAT THERE ARE VALUABLE TREES LIKE TEAK, MANGOES, C OCONUT, JACK FRUITS, KOKUM ETC. IN THIS REGARD, IT WAS FURTHER SUBMITTED THAT THE AFORESAID TREES ONCE PLANTED GROW ON THEIR OWN AND DO NOT REQUIRE YEARLY SEEDING, SOURING, PLOUGHING ET C. LIKE PADDY/VEGETABLE CROPS. RELIANCE WAS PLACED IN THIS REGARD ON THE DECISION OF HON'BLE PATNA HIGH COURT IN THE C ASE OF DEEN MOHAMMAD MIAN VS. HULAS NARIAN SINGH, 21 ITR 336 (PATNA) PARTICULARLY AT PG. 347 IN WHICH IT WAS HELD THAT - THE CASE OF AN ORCHARD IS QUITE DIFFERENT. ORCHARD TREES ORDINARILY ARE, AND CAN BE PRESUMED TO HAVE BEEN, PLANTED BY MAN AFTER PREPARATION OF THE GROUND WHICH IS CULTIVATION AND SEASONAL CROPS ARE GATHERED. FRUIT TREES ALSO REQUIRE SEASONAL ATTENTION SUCH AS PRUNING AND DIGGING OF THE SOIL AROUND THE ROOTS AND IT CANNOT BE SAID THAT THIS CEASES TO BE CULTIVATION MERELY BECAUSE TH E WHOLE TREE IS NOT REPLANTED EVERY YEAR. 16.1 ATTENTION WAS ALSO DRAWN TOWARDS THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. K.E. SUNDARA MUDALIAR AND OTHERS, 18 ITR 259 AT PG. 273 IN WHICH THE HON'BLE COURT OBSERVED THAT I T IS A MATTER OF ORDINARY EXPERIENCE, ATLEAST IN THIS PART OF THE COUNTRY THAT A MANGO, COCONUT, PALMYRA, ORANGE, JACK, ORANGE, TAMARIND AND OTHER TREES ARE PLANTED USUALLY IN AN ENCLOSED LAND AND THESE TREES DO NOT YIELD ANY FRUIT OR CROP IN THE EARLY YEA RS OF THEIR GROWTH . THEY REMAIN ON THE LAND FOR A LONG NUMBER OF YEARS YIELDING FRUIT ONLY AFTER THEIR MATURITY. THERE IS NO REASON WHY THE PLANTING, REARING, WATERING, FENCING AND PROTECTION OF SUCH TREES AND GATHERING OF THEIR FRUITS DURING THE ANNUAL S EASON SHOULD NOT BE HELD TO BE AGRICULTURE. 16.2 RELIANCE WAS ALSO PLACED IN THIS REGARD ON THE DECISION OF THE PUNE BENCH ITAT IN THE CASE OF HARESH V. MILANI VS. JCIT, 114 ITD 428 (PUNE), ESPECIALLY AT PG. 447 FOR THE PROPOSITION OF LAW THAT AGRICULT URAL PRODUCE WOULD HAVE BEEN CONSUMED BY THE ASSESSEE AND THEREFORE NO QUESTION OF RETURNING THE AGRICULTURAL INCOME ARISES. REFERRING TO THE PROVISIONS OF SEC. 2(14) OF INCOME 36 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) TAX ACT, 1961 IT WAS CONTENDED THAT IT IS NOT NECESSARY THAT THE LAND SHOULD G ENERATE AGRICULTURAL INCOME AND ASSESSED TO TAX FOR BEING TREATED AS AGRICULTURAL LAND. IN THE INCOME TAX ACT, 1922 AND THE PROPOSED DTC IT IS SPECIALLY MADE A CONDITION. UNDER SEC. 2(14) OF INCOME TAX ACT, 1961 THE ONLY CONDITION PROVIDED IS IN REGARD T O DISTANCE OF THE LAND AND POPULATION OF THE REGION IN WHICH THE LAND IS SITUATED. THE AO ON BOTH THESE ACCOUNTS HAS GIVEN A FINDING IN FAVOUR OF THE ASSESSEE. DIFFERENCE IN THE LANGUAGE OF THE 1922 ACT AND 1961 ACT HAS JUDICIALLY BEEN RECOGNISED BY THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SUTTON & SONS LTD., 127 ITR 57 AT PG. 60 WHERE THE HON'BLE COURT HAS OBSERVED THAT THERE IS A SIGNIFICANT DEPARTURE IN THE DEFINITION OF CAPITAL ASSET ASSESSED IN THE 1961 ACT AS IT STOOD AT THE RELEVANT T IME SO FAR AS AGRICULTURAL LAND IS CONCERNED. CAPITAL ASSET UNDER THE 1961 ACT EXCLUDED AGRICULTURAL LAND IN INDIA BUT UNDER THE 1922 ACT, IT WAS NOT ALL THE AGRICULTURAL LAND WHICH WAS EXCLUDED FROM THE DEFINITION OF CAPITAL ASSET BUT ONLY THE LANDS, THE INCOME DERIVED FROM WHICH WAS AGRICULTURAL. SO THE PURPOSE FOR WHICH THE AGRICULTURE WAS CARRIED OUT WAS A RELEVANT FACTOR UNDER THE 1922 ACT. IN THE DEFINITION UNDER WHICH WE HAVE TO CONSIDER WHETHER THE LAND IN QUESTION WAS AGRICULTURAL LAND OR NOT, ALL THAT WAS REQUIRED TO BE SEEN WAS WHETHER THE LAND IN QUESTION WAS AN AGRICULTURAL LAND IN INDIA. UNDER THE INCOME TAX ACT, 1922 SEC. 2(4)(A)(III) DEFINES AGRICULTURAL LAND AS ANY LAND FROM W HICH INCOME DERIVED IS AGRICULTURAL INCOME. IN THE CASE OF CIT VS. BORHAT TEA CO. LTD. , 138 ITR 783 (CAL.) IT WAS POINTED OUT THAT THE HON'BLE HIGH COURT HAS CATEGORICALLY TAKEN THE VIEW THAT FOR THE PURPOSE OF LAND BEING AGRICULTURAL LAND, ACTUAL AGRICU LTURAL OPERATIONS OR CULTIVATION OR TILLING OF THE LA ND IS NOT NECESSARY. REFERRING TO PG. 282 OF THE PAPER BOOK IT WAS SUBMITTED THAT THE SARPANCH OF THE VILLAGE PANCHAYAT HAS CERTIFIED THAT THE SAID LAND IS NOTIFIED AS CRZ - I AND NO DEVELOPMENT CAN BE DO NE. IT WAS ALSO SUBMITTED THAT IN THE VALUATION REPORT SUBMITTED BY THE GOVERNMENT APPROVED VALUER , THE SAID AUTHORITY HAS INSPECTED 37 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) AND CERTIFIED EXISTENCE OF AFORESAID TREES AND ALSO THE CERTIFICATE OF TALUKA REVENUE OFFICE ALSO CERTIFIES EXISTENCE OF T HE TREES. THE LD. AR VEHEMENTLY CONTENDED THAT EVEN THE BUYER HAS NOT CHANGED THE NATURE OF THE LAND. THE LAND IS LYING IN THE SAME POSITION EVEN AS ON TODAY. 17. THE LD. DR ON THE OTHER HAND CONTENDED THAT THE SALE DEED NOWHERE STATES THAT THE IMPUGNED LAND IS AN AGRICULTURAL LAND. THE LAND SOLD IS NOT AN AGRICULTURAL LAND. FOR THIS OUR ATTENTION WAS DRAWN TOWARDS THE SALE DEED. REFERRING TO THE REPORT OF THE INSPECTOR DT. 16.12.2010 AND 19.10.2011 IT WAS SUBMITTED THAT THE LAND PROPERTY IS HILLY AREA AND IS ROCKY. VERY FEW MANGO TREES, CASHEW TREES, JACKFRUIT TREES, COCONUT TREES, COCUM TREES AND WILD TREES ARE STANDING ON THE LAND THAT ALSO ONLY ON A LITTLE PORTION OF THE LAND . THERE IS NO FACILITY OF WATER. NO AGRICULTURAL ACTIVITY HAS EVER BEEN CARRIED OUT BY THE ASSESSEE. THE ASSESSEE HAS NOT SHOWN ANY AGRICULTURAL INCOME. THE LAND IS A BARREN LAND AND IS NOT A CULTIVABLE LAND. REFERRING TO THE CERTIFICATE ISSUED BY THE OFFICER IN - CHARGE AS FILED BY THE ASSESSEE, IT WAS SUBMITTED THAT THERE A RE HARDLY 3 500 TREES ON LAND OF 2, 18,250 SQ. MTRS. THE LAND CANNOT BE USED FOR AGRICULTURAL PURPOSE AS THERE IS NO SOURCE OF WATER. EVEN THERE IS NO ARRANGEMENT FOR WATERING THE LAND. WHATEVER TREES ARE THERE, THEY ARE OLD TREES WHICH HAVE SPONTANEOUSLY GROWN. THE LAND CANNOT BE REGARDED TO BE AN AGRICULTURAL LAND. ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RAJA BENOY KUMAR SAHAS ROY DT. 23.5.1957. IN RESPECT OF THE DECISION RELIED ON BY THE ASSESSEE, IT WAS SUBMITTED THAT THOSE DECISIONS ARE NOT APPLICABLE. 17 . 1 IN THE REJOINDER, THE LD. AR RELIED ON THE FOLLOWING DECISIONS : I) CHAND PRABHA JAIN VS. ACIT, 34 CCH 125 DELTRIB II) GEMINI PICTURES CIRCUIT P. LTD. VS. CIT, 130 ITR 686 (MAD.) 38 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) III) LAVLEEN SINGHAL VS. DCIT, 111 TTJ (DEL) 326 IV) ITO, INDORE VS. ASHOK SHUKLA, [2012] 139 ITD 666 (INDORE) V) CIT VS. P.C. JOSHI & B.C. JOSHI, 202 ITR 1017 (BOM) VI) CIT VS. SMT. DEBBIE ALEMAO & JOAQUIM ALEMAO, 331 ITR 59 (BOM) VII) CIT VS. MINGUEL CHANDRA PAIS & ANR., 282 ITR 618 (BOM) OUR ATTENTION WAS ALSO DRAWN TOWARDS GOA AGRICULTURAL TENANCY ACT, 1964 WHICH DEFINES LAND. REFERRING TO SEC. 2(11) IT WAS SUBMITTED THAT THIS ACT DEFINES LAND TO MEAN LAND WHICH IS USED FOR AGRICULTURE OR WHICH IS CAPABLE OF BEING SO USED, BUT IS LE FT FALLOW AND INCLUDES FARM BUILDING APPURTENANT TO SUCH LAND. DURING THE COURSE OF THE HEARING, THE BENCH OBSERVED HOW THE LAND CAN BE STATED TO BE AGRICULTURAL LAND WHEN THERE ARE ONLY 3 500 TREES STANDING ON THE LAND MEASURING 2,12,850 SQ. MTRS. IF P ART OF THE LAND IS BARREN, HOW IT CAN BE REGARDED TO BE AN AGRICULTURAL LAND. THE BENCH ALSO OBSERVED DURING THE COURSE OF THE HEARING BY REFERRING TO THE DECISION AS RELIED BY THE LD. AR IN THE CASE OF CIT VS. BORHAT TEA CO. LTD. , 138 ITR 783 (CAL.) ( SUP RA ) IN WHICH AT PG. 789 THE HON'BLE HIGH COURT HAD CLEARLY STATED THAT IT IS TO BE SEEN WHETHER SUCH LAND IS CAPABLE OF AGRICULTURAL OPERATIONS BEING CARRIED ON. ON THIS, THE LD. AR REQUESTED THE BENCH THAT IT CAN BY EXERCISING THE POWER U/S 255(6) HAVE A PERSONAL INSPECTION SO THAT THE TRUE NATURE OF THE LAND CAN BE ASCERTAINED. THE LD. DR ALSO AGREED TO THIS PROPOSITION. 17.2 THE BENCH, IN VIEW OF THE REQUEST OF BOTH THE PARTIES ISSUED SUMMONS U/S 255(6) FOR CONDUCTING SITE VISIT ON 1.4.2014. ON THAT DAY, THE BENCH CONDUCTED SITE INSPECTION ALONGWITH THE LD. DR, SMT. SONAL SONKAVDE AND THE COUNSEL OF THE ASSESSEE, SHRI JITENDRA JAIN . 39 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) 17.3 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE VARIOUS CASE LAWS RELIED BEFORE US. THE ONLY QUESTION BEFORE US IS WHETHER THE LAND SOLD BY THE ASSESSEE IS A CAPITAL ASSET. BEFORE DECIDING THE ISSUE WHETHER THE LAND SOLD BY THE ASSESSEE IS A CAPITAL ASSET, WE ARE OF THE VIEW THAT PRO VISIONS OF SEC. 2(14) BE REFERRED TO AS CAPITAL ASSET IS DEFINED U/S 2(14) OF THE INCOME TAX ACT. THIS SECTION LAYS DOWN AS UNDER : 'CAPITAL ASSET' MEANS PROPERTY OF ANY KIND HELD BY AN ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION , BUT DOES NOT INCLUDE (I) ANY STOCK - IN - TRADE, CONSUMABLE STORES OR RAW MATERIALS HELD FOR THE PURPOSES OF HIS BUSINESS OR PROFESSION ; (II) PERSONAL EFFECTS, THAT IS TO SAY, MOVABLE PROPERTY (INCLUDING WEARING APPAREL AND FURNITURE) HELD FOR PERSONAL USE BY THE ASSESSEE OR ANY MEMBER OF HIS FAMILY DEPENDENT ON HIM, BUT EXCLUDES ( A ) JEWELLERY; ( B ) ARCHAEOLOGICAL COLLECTIONS; ( C ) DRAWINGS; ( D ) PAINTINGS; ( E ) SCULPTURES; OR ( F ) ANY WORK OF ART. EXPLANATION. FOR THE PURPOSES OF THIS SUB - CLAUSE, 'JEWELLERY' INCLUDES ( A ) ORNAMENTS MADE OF GOLD, SILVER, PLATINUM OR ANY OTHER PRECIOUS METAL OR ANY ALLOY CONTAINING ONE OR MORE OF SUCH PRECIOUS METALS, WHETHER OR NOT CONTAINING ANY PRECIOUS OR SEMI - PRECIOUS STONE, AND WHETHER OR NOT WORKED OR SEWN INT O ANY WEARING APPAREL; ( B ) PRECIOUS OR SEMI - PRECIOUS STONES, WHETHER OR NOT SET IN ANY FURNITURE, UTENSIL OR OTHER ARTICLE OR WORKED OR SEWN INTO ANY WEARING APPAREL;] [( III ) AGRICULTURAL LAND IN INDIA, NOT BEING LAND SITUATE (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURISDICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNICIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A POPU LATION OF NOT LESS THAN TEN THOUSAND [ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR] ; OR 40 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) ( B ) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MORE THAN EIGHT KILOMETRES, FRO M THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITEM ( A ), AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANISATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS, SPECIFY IN THIS BEHALF BY NOTIFIC ATION IN THE OFFICIAL GAZETTE;] FROM THE READING OF THIS SECTION , IT IS APPARENT THAT THE PROPERTY OF ANY KIND HELD BY THE ASSESSEE WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION ARE CAPITAL ASSET BUT THE ASSETS WHICH ARE GIVEN UNDER SUB - CLAUSE (I), (II) AND (III) ARE EXCLUDED FROM THE CAPITAL ASSET. SUB - CLAUSE (III) EXCLUDES AGRICULTURAL LAND IN INDIA BUT THIS EXCLUSION HAS CERTAIN EXCEPTIONS IN WHICH CASE EVEN THOUGH THE LAND IS AGRICULTURAL LAND, IT WILL NOT FALL WITHIN THE EXCEPTION AND WILL BE REGARDED TO BE A CAPITAL ASSET. THE EXCEPTIONS ARE PROVIDED ON THE BASIS OF THE LOCATION OF THE AGRICULTURAL LAND. CLAUSE (A) OF SUB - CLAUSE (III) OF SEC. 2(14) TALKS OF AGRICULTURAL LAND WHICH IS SITUATED IN ANY AREA WITHIN THE JURISDICTION OF MUNICI PALITY, MUNICIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME OR A CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND . CLAUSE (B) OF THE SAID SUB - CLAUSE TALKS OF AGRICULTURAL LAND WHICH IS SITUATED WITHIN 8 KMS. FROM THE LOCAL LIMITS OF MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN CLAUSE (A) AS MAY BE NOTIFIED BY THE CENTRAL GOVERNMENT HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANISATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS . IT IS NOT THE CASE OF THE REVENUE THAT THE LAND SOLD BY THE ASSESSEE IS HIT BY CLAUSE (A) OR (B) OF SUB - CLAUSE (III) OF SEC. 2(14) . THE IMPUGNED LAND IS SITUATED MORE THAN 8 KMS. FROM CANACONA MUNICIPAL COMMITTEE. NOW, THEREFORE, THE ONL Y QUESTION BEFORE US IS WHETHER THE LAND SOLD BY THE ASSESSEE IS AN AGRICULTURAL LAND IN INDIA. THE ASSESSEE CLAIMS THAT THE LAND SOLD BY THE ASSESSEE IS AN AGRICULTURAL LAND IN INDIA WHILE THE CLAIM OF THE REVENUE IS THAT THE IMPUGNED LAND CANNOT BE REGA RDED TO BE AN AGRICULTURAL LAND. THE AGRICULTURAL LAND IS NOT DEFINED UNDER THE INCOME TAX ACT, 1961. ON THIS WE DO AGREE WITH THE LD. AR. 41 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) 17.4 WHAT CONSTITUTES AGRICULTURAL LAND HAS BEEN THE SUBJECT MATTER OF CONSIDERATION IN A NUMBER OF JUDICIAL DECIS IONS. THE SUPREME COURT IN CWT V. OFFICER - IN - CHARGE (COURT OF WARDS) (1976) 105 ITR 133 (SC) OBSERVED THAT WHAT IS REALLY REQUIRED TO BE SHOWN IS CONNECTION WITH AN AGRICULTURAL PURPOSE AND THE USER AND NOT THE MERE POSSIBILITY OF LAND BEING USED BY SOME POSSIBLE FUTURE OWNER OR POSSESSOR FOR AN AGRICULTURAL PURPOSE. 17.5 SIMILARLY, IT WAS HELD BY THE DELHI HIGH COURT IN SHIV SHANKAR LAL V. CIT (1974) 94 ITR 433 (DEL) THAT WHERE A LAND HAS BEEN PUT TO AGRICULTURAL PURPOSE FOR A LONG PERIOD AND THE AGRICUL TURAL OPERATIONS WERE TEMPORARILY SUSPENDED, THE LAND DOES NOT CEASE TO BE AN AGRICULTURAL LAND. THE BOMBAY HIGH COURT IN CIT V SMT. DEBBIE ALEMAO (2011) 331 ITR 59 (BOM) HELD THAT EVEN THOUGH AGRICULTURAL OPERATIONS ON LAND DOES NOT RESULT IN GENERATION OF SURPLUS, THE LAND WOULD STILL CONTINUE TO BE TREATED AS AGRICULTURAL LAND. 17.6 THE MADRAS HIGH COURT IN THE CASE OF MS SRINIVASA NAICKER V ITO (2007) 292 ITR 481 (MAD) HELD THAT WHERE THE LANDS IN QUESTION WERE UNDER AGRICULTURE OPERATION ON THE DATE OF SALE, THESE WERE NOT TO BE TREATED AS CAPITAL ASSETS AND IT MATTERED VERY LITTLE HOW SUBSEQUENT PURCHASERS INTENDED THE LAND IN QUESTION TO BE PUT TO USE. 17.7 THE HON'BLE SUPREME COURT HAD THE OCCASION TO DEFINE THE WORD AGRICULTURE IN THE CASE OF C IT VS. RAJA BENOY KUMAR SAHAS ROY, 32 ITR 466. IN THAT CASE THE HON'BLE SUPREME COURT IN RESPECT OF AGRICULTURE AND AGRICULTURAL PURPOSES HELD AS UNDER : HEAD NOTE 42 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) AGRICULTURE IN ITS PRIMARY SENSE DENOTES THE CULTIVATION OF THE FIELD AND IS RESTRICTED TO CULTIVATION OF THE LAND IN THE STRICT SENSE OF THE TERM, MEANING THEREBY TILLING OF THE LAND, SOWING OF THE SEEDS, PLANTING AND SIMILAR OPERATIONS ON THE LAND. THESE ARE BASIC OPERATIONS AND REQUIRE THE EXPENDITURE OF HUMAN SKILL AND LABOUR U PON THE LAND ITSELF. THOSE OPERATIONS WHICH THE AGRICULTURIST HAS TO RESORT TO AND WHICH ARE ABSOLUTELY NECESSARY FOR THE PURPOSE OF EFFECTIVELY RAISING PRODUCE FROM THE LAND, OPERATIONS WHICH ARE TO BE PERFORMED AFTER THE PRODUCE SPROUTS FROM THE LAND, E .G., WEEDING, DIGGING THE SOIL AROUND THE GROWTH, REMOVAL OF UNDESIRABLE UNDERGROWTH, AND ALL OPERATIONS WHICH FOSTER THE GROWTH AND PRESERVATION OF THE SAME NOT ONLY FROM INSECTS AND PESTS BUT ALSO FROM DEPRADATION FROM OUTSIDE, TENDING, PRUNING, CUTTING, HARVESTING AND RENDERING THE PRODUCE FIT FOR THE MARKET, WOULD ALL BE AGRICULTURAL OPERATIONS WHEN TAKEN IN CONJUNCTION WITH THE BASIC OPERATIONS. THE HUMAN LABOUR AND SKILL SPENT IN THE PERFORMANCE OF THESE SUBSEQUENT OPERATIONS CANNOT BE SAID TO HAVE BE EN SPENT ON THE LAND ITSELF. THE MERE PERFORMANCE OF THESE SUBSEQUENT OPERATIONS ON THE PRODUCTS OF THE LAND, WHERE SUCH PRODUCTS HAVE NOT BEEN RAISED ON THE LAND BY THE PERFORMANCE OF THE BASIC OPERATIONS, WOULD NOT BE ENOUGH TO CHARACTERISE THEM AS AGRI CULTURAL OPERATIONS; IN ORDER TO INVEST THEM WITH THE CHARACTER OF AGRICULTURAL OPERATIONS THESE SUBSEQUENT OPERATIONS MUST NECESSARILY BE IN CONJUNCTION WITH AND IN CONTINUATION OF THE BASIC OPERATIONS WHICH ARE THE EFFECTIVE CAUSE OF THE PRODUCTS BEING R AISED FROM THE LAND. THE SUBSEQUENT OPERATIONS DIVORCED FROM THE BASIC OPERATIONS CANNOT CONSTITUTE BY THEMSELVES AGRICULTURAL OPERATIONS. ONLY IF THIS INTEGRATED ACTIVITY WHICH CONSTITUTES AGRICULTURE IS UNDERTAKEN AND PERFORMED IN REGARD TO ANY LAND CAN THAT LAND BE SAID TO HAVE BEEN USED FOR AGRICULTURAL PURPOSES AND THE INCOME DERIVED THEREFROM BE SAID TO BE AGRICULTURAL INCOME DERIVED FROM THE LAND BY AGRICULTURE, UNDER SECTION 2(I) OF THE INDIAN INCOME - TAX ACT, 1922. AGRICULTURE COMPRISES WITHIN ITS SCOPE THE BASIC AS WELL AS THE SUBSEQUENT OPERATIONS DESCRIBED ABOVE REGARDLESS OF THE NATURE OF THE PRODUCTS RAISED ON THE LAND. THESE PRODUCTS MAY BE GRAIN OR VEGETABLE OR FRUITS WHICH ARE NECESSARY FOR THE SUSTENANCE OF HUMAN BEINGS, INCLUDING PLAN TATIONS AND GROVES, OR GRASS OR PASTURE FOR THE CONSUMPTION OF BEASTS OR ARTICLES OF LUXURY, SUCH AS BETEL, COFFEE, TEA, SPICES, TOBACCO, OR COMMERCIAL CROPS LIKE COTTON, FLAX, JUTE, HEMP, INDIGO. ALL THESE ARE PRODUCTS RAISED FROM THE LAND BUT THE TERM AG RICULTURE CANNOT BE CONFINED MERELY TO THE PRODUCTION OF GRAIN AND FOOD PRODUCTS FOR HUMAN BEINGS AND BEASTS; IT MUST BE UNDERSTOOD AS COMPRISING ALL THE PRODUCTS OF THE LAND WHICH HAVE SOME UTILITY EITHER FOR CONSUMPTION OR FOR TRADE AND COMMERCE AND WOUL D ALSO INCLUDE FOREST PRODUCTS 43 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) SUCH AS TIMBER AND SAL AND PIYASAL TREES, CASUARINA PLANTATIONS, TENDU LEAVES AND HORRA NUTS. THERE IS NO WARRANT AT ALL FOR EXTENDING THE TERM AGRICULTURE TO ALL ACTIVITIES WHICH HAVE SOME RELATION TO THE LAND OR ARE IN A NY WAY CONNECTED WITH THE LAND, FOR THE TERM AGRICULTURE CANNOT BE DISSOCIATED FROM THE PRIMARY SIGNIFICANCE THEREOF, WHICH IS THAT OF CULTIVATION OF THE LAND. THE EXTENSION OF THE TERM AGRICULTURE TO DENOTE SUCH ACTIVITIES AS BREEDING AND REARING LIVEST OCK, DAIRY FARMING, BUTTER AND CHEESE - MAKING, AND POULTRY FARMING, IS AN UNWARRANTED DISTORTION OF THE TERM. 17.8 THE HON'BLE SUPREME COURT CLEARLY LAID DOWN THAT THE TERM AGRICULTURE CANNOT BE DISSOCIATED FROM THE PRIMARY SIGNIFICANCE I.E. CULTIVATION OF THE LAND. CULTIVATION OF THE LAND IS AN ESSENTIAL INGREDIENT FOR DENOTING THAT THERE IS AGRICULTURE. CULTIVATION OF THE LAND MEANS TILLING OF THE LAND, SOWING OF THE SEEDS, PLANTING, AND SIMILAR OPERATIONS ON THE LAND . IN THIS CASE, THE HON'BLE SUPREME COURT FURTHER TOOK THE VIEW THAT THE TERM AGRICULTURE CANNOT BE CONFINED MERELY TO THE PRODUCTION OF GRAIN AND FOOD PRODUCTS FOR HUMAN CONSUMPTION BUT IT MUST BE UNDERSTOOD TO INCLUDE ALL THE PRODUCTS OF THE LAND WHIC H HAVE SOME UTILITY EITHER FOR CONSUMPTION OR FOR TRADE AND COMMERCE AND WOULD ALSO INCLUDE FOREST PRODUCTS SUCH AS TIMBER, SAL AND PIYASAL TREES, CASUARINA PLANTATIONS, TENDU LEAVES AND HORRANUTS . THUS, IF THE LAND, IN OUR OPINION, IS CULTIVABLE, IT CAN BE REGARDED TO BE AGRICULTURAL LAND. IF THE LAND IS NOT CULTIVABLE, IT CANNOT BE REGARDED TO BE AGRICULTURAL LAND. OUR AFORESAID VIEW IS DULY SUPPORTED BY THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BORHAT TEA CO. LTD. , 138 ITR 783 (CAL.) ( SUPRA ) ON WHICH THE LD. AR HAS RELIED, WHEREIN AT PG. 789 THE HON'BLE HIGH COURT HAS CLEARLY TAKEN THE VIEW THAT THE LAND MUST BE CAPABLE OF AGRICULTURAL OPERATIONS BY OBSERVING AS UNDER : THUS, FOR THE PURPOSE OF LAND BEING AGRICULTURAL LAN D, ACTUAL AGRICULTURAL OPERATIONS OR CULTIVATION OR TILLING OF THE LAND IS NOT NECESSARY . IT IS TO BE SEEN WHETHER SUCH LAND IS CAPABLE OF AGRICULTURAL OPERATIONS BEING CARRIED ON . 44 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) 17.9 THUS, FOR THE PURPOSE OF LAND BEING AGRICULTURAL LAND, ACTUAL AGRICULTURAL OPERATIONS OR CULTIVATION OR TILLING OF THE LAND IS NOT NECESSARY. IT IS TO BE SEEN WHETHER SUCH LAND IS CAPABLE OF AGRICULTURAL OPERATIONS BEING CARRIED ON. THE DECISION OF THE H ON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. K.E. SUNDARA MUDALIAR AND OTHERS, 18 ITR 259 ( SUPRA ) , AS HAS BEEN RELIED ON BY THE LD. AR, HAS DULY BEEN REFERRED TO BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RAJA BENOY KUMAR SAHAS ROY, 32 ITR 466 ( SUPRA ) . THAT DECISION DOES NOT DEAL WITH THE PROPOSITION OF LAW WHETHER AGRICULTURAL LAND SHOULD BE CAPABLE OF CARRYING ON AGRICULTURAL OPERATIONS. IN THAT DECISION WHICH WAS RENDERED UNDER THE INDIAN INCOME TAX ACT, 1922, THE QUESTION BEFORE THE HON'BL E HIGH COURT WAS WHETHER THE INCOME DERIVED FROM CASUARINA PLANTATIONS IS AN AGRICULTURAL INCOME WITHIN THE MEANING OF SEC. 2(1) OF THE INCOME TAX ACT. WHILE DECIDING THIS QUESTION, THE HON'BLE HIGH COURT TOOK THE VIEW THAT IRRESPECTIVE OF THE NATURE OF T HE PRODUCE OR PRODUCT OF THE LAND, WHATEVER IS GROWN ON THE LAND AIDED BY HUMAN LABOUR AND EFFORT, WHATEVER DOES NOT GROW WILD OR SPONTANEOUSLY ON THE SOIL WITHOUT HUMAN LABOUR OR EFFORT WOULD BE AN AGRICULTURAL PRODUCT , AND THE PROCESS OF PRODUCING IT WOU LD BE AGRICULTURE WITHIN THE MEANING OF THAT EXPRESSION IN SEC. 2 OF THE INCOME TAX ACT AND ULTIMATELY THE HON'BLE HIGH COURT TOOK THE VIEW THAT WHERE A MANGO, COCONUT, PALMYRA, ORANGE, JACK, ARECANUT, TAMARIND AND OTHER TREES ARE PLANTED USUALLY IN AN E NCLOSED LAND, THESE TREES REQUIRE SOME KIND OF CULTIVATION OR PRODDING OF THE SOIL AT THE INCEPTION WHEN THE PLANTING IS DONE AND SUBSEQUENTLY ALSO AT INTERVALS. THE HON'BLE HIGH COURT NOWHERE TOOK THE VIEW THAT IF THE LAND IS UNCULTIVABLE, IT WILL BE REG ARDED THAT THE LAND IS USED FOR AGRICULTURAL PURPOSES. THIS DECISION MAY HELP THE ASSESSEE ONLY IN RESPECT OF THE PORTION OF THE LAND ON WHICH CO CONUT ETC. TREES ARE STANDING BUT NOT IN RESPECT OF THE LAND WHICH IS TOTALLY UNCULTIVABLE. 45 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) 17.10 IN THE CASE OF CIT VS. SUTTON & SONS LTD., 127 ITR 57 ( SUPRA ) WE NOTED THAT THE HON'BLE CALCUTTA HIGH COURT TOOK THE VIEW THAT FOR DETERMINING WHETHER THE LAND IS AN AGRICULTURAL LAND, NATURE OF THE OPERATIONS CARRIED ON BY THE ASSESSEE ARE RELEVANT AND NO T THE PURPOSE FOR WHICH THE OPERATIONS ARE CARRIED ON , ON THE LAND. IN THIS CASE, THE HON'BLE HIGH COURT ALSO TOOK THE VIEW THAT IF THE LAND IS ACTUALLY USED FOR CULTIVATION AND AGRICULTURAL OPERATIONS ARE CARRIED OUT, THOUGH ON A LIMITED EXPERIMENTAL SCA LE, THE LAND WILL BE AN AGRICULTURAL LAND AND WILL COME OUT OF DEFINITION OF CAPITAL ASSET. THE HON'BLE HIGH COURT IN THIS CASE, NO DOUBT HAD MADE A COMPARATIVE STUDY FOR THE DEFINITION OF CAPITAL ASSETS GIVEN UNDER THE INCOME TAX ACT, 1922 AND INCOME TAX ACT, 1961 AND TOOK THE VIEW THAT CAPITAL ASSETS UNDER 1961 ACT EXCLUDED AGRICULTURAL LAND IN INDIA BUT UNDER THE 1922 ACT, IT WAS NOT ALL AGRICULTURAL LANDS WHICH WERE EXCLUDED FROM THE DEFINITION OF CAPITAL ASSETS BUT ONLY THE LAND, THE INCOME DERIVED FROM WHICH WAS AGRICULTURAL AND THEREFORE ULTIMATELY OBSERVED THAT UNDER THE 1961 ACT, ALL THAT WAS REQUIRED TO SEE WAS WHETHER THE LAND IN QUESTION WAS AN AGRICULTURAL LAND IN INDIA. THIS DENOTES, IN OUR OPINION, THAT IT IS NOT NECESSARY THAT LAND MUST B E ACTUALLY USED FOR AGRICULTURAL PURPOSES BUT IT M UST BE CAPABLE OF CARRYING ON AGRICULTURAL OPERATIONS. THIS DECISION NOWHERE DEALS WITH THE PROPOSITION OF LAW THAT IF THE LAND IS A BARREN LAND AND CANNOT BE CULTIVATED, IT WILL STILL BE REGARDED TO BE AN AGRICULTURAL LAND. THIS DECISION, IN OUR OPINION, WILL NOT ASSIST THE ASSESSEE. 17.11 IN THE CASE OF HARESH V. MILANI VS. JCIT, 114 ITD 428 (PUNE) , ON WHICH THE LD. AR HAS RELIED, WE NOTED THAT THE HON'BLE TRIBUNAL HELD THAT IN THE REVENUE RECORD THE SAID LAND WAS CLASSIFIED AS AGRICULTURAL LAND AND IT WAS ALSO INDICATED THEREIN THAT AGRICULTURAL OPERATIONS WERE CARRIED OUT ON IT BY OWNER HIMSELF AND ASSESSEE HAS NOT APPLIED FOR CONVERSION OF THE LAND FOR NON - AGRICULTURAL PURPOSES AND NO SUCH PERMISSIO N WAS OBTAINED FROM THE CONCERNED 46 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) AUTHORITY. ON THESE FACTS, THE HON'BLE TRIBUNAL TOOK THE VIEW THAT THE LAND SOLD BY THE ASSESSEE WAS AN AGRICULTURAL LAND. THIS DECISION, IN OUR OPINION, WILL ALSO NOT APPLY TO THE FACTS OF THE CASE OF THE ASSESSEE AS IN THE CASE OF THE ASSESSEE , THERE IS NO EVIDENCE ON RECORD THAT THE ASSESSEE HAS CARRIED OUT AGRICULTURAL OPERATIONS ON THE LAND. TREES ETC. ARE STANDING ONLY ON PART OF THE LAND WHICH IS APPARENT FROM OUR PERSONAL VISIT TO THE SITE ALONGWITH THE COUNSEL O F THE ASSESSEE AND LD. DR, CARRIED OUT AS PER THE PROVISIONS OF SEC. 255(6). THIS DECISION, THEREFORE, WILL NOT ASSIST THE ASSESSEE. 17.12 IN THE CASE OF DEEN MOHAMMAD MIAN VS. HULAS NARIAN SINGH, 21 ITR 336 (PATNA) ( SUPRA ) WE NOTED THE OBSERVATIONS OF THE HON'BLE HIGH COURT AS ARE MADE AT PG. 347 ON WHICH THE LD. AR HAS RELIED. EVEN THOUGH THIS CASE DOES NOT DEAL WITH THE QUESTION WHETHER THE LAND IS AN AGRICULTURAL LAND, THE RELEVANT OBSERVATIONS ARE LAID DOWN AS UNDER : THE CASE OF AN ORCHARD IS QU ITE DIFFERENT. ORCHARD TREES ORDINARILY ARE, AND CAN BE PRESUMED TO HAVE BEEN, PLANTED BY MAN AFTER PREPARATION OF THE GROUND WHICH IS CULTIVATION AND SEASONAL CROPS ARE GATHERED. FRUIT TREES ALSO REQUIRE SEASONAL ATTENTION SUCH AS PRUNING AND DIGGING OF THE SOIL AROUND THE ROOTS AND IT CANNOT BE SAID THAT THIS CEASES TO BE CULTIVATION MERELY BECAUSE THE WHOLE TREE IS NOT REPLANTED EVERY YEAR. 17.13 WE MAY MENTION THAT IN THE CASE OF THE ASSESSEE THERE ARE ONLY 3850 TREES AS PER THE EVIDENCE FILED BY T HE ASSESSEE ON A SMALL PORTION OF THE LAND. THIS OBSERVATION CAN BE RELEVANT ONLY FOR THAT PORTION OF THE LAND AS THE REST OF THE LAND, AS WE WILL DISCUSS SUBSEQUENTLY, IN OUR OPINION, IS NOT CAPABLE OF CULTIVATION. 17.14 IN THE CASE OF CHAND PRABHA JAI N VS. ACIT, 34 CCH 125 DELTRIB, THE HON'BLE TRIBUNAL TOOK THE VIEW THAT 47 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) THE CHARACTERISTICS OF LAND HAS TO BE DECIDED AS PER PROVISIONS OF INCOME - TAX ACT. WHERE CHARACTER OF LAND SOLD WAS AGRICULTURAL AS ON DATE OF SALE, INTENTION OF PURCHASER IS IRRELEVANT CONSIDERATION FOR DETERMINING WHETHER OR NOT LAND IN QUESTION WAS CAPITAL ASSET U/S. 2(14)(III) OF THE ACT. WE DO AGREE THAT THE CHARACTERISTICS OF THE LAND HAS TO BE DECIDED AS PER THE PROVISIONS OF INCOME TAX ACT ONLY AT THE DATE OF THE SAL E. IF THE LAND CAN BE REGARDED TO BE AN AGRICULTURAL LAND ON THE DATE OF THE SALE, THE ASSESSEE WILL HAVE A CASE. IF THE LAND CANNOT BE REGARDED TO BE AN AGRICULTURAL LAND, THEN, IT WILL BE A CAPITAL ASSET AS PER PROVISIONS OF SEC. 2(14). 17.15 IN THE C ASE OF L A VLEEN SINGHAL VS. DCIT, 1 1 1 TTJ ( DEL ) 326, THE TRIBUNAL TOOK THE VIEW THAT LAND BEING RECORDED AS AGRICULTURAL LAND IN REVENUE RECORDS AT THE TIME OF PURCHASE BY ASSESSEE AND NOTHING HAVING BEEN DONE BY ASSESSEE FOR PUTTING IT TO NON - AGRICULTURAL USE, SAME COULD NOT BE TREATED AS NON - AGRICULTURAL ONLY BECAUSE ASSESSEE DID NOT CULTIVATE IT FOR FOURTEEN YEARS AND AS PER CERTIFICATE ISSUED BY TEHSILDAR, LAND FALLING BEYOND 8 KMS. FROM COMMITTEE AREA, WAS OUT OF THE PURVIEW OF CAPITAL ASSET, HENCE NO CAPITAL GAINS AROSE ON ITS SALE. THIS DECISION, IN OUR OPINION, WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE AS THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE ARE ENTIRELY DIFFERENT. THE ONLY PART OF THE PROPERTY HAS COCONUT ETC. TREES. I T IS HAVING RUBBLE COMPOUND WALL, RETAINING WALL, A HOUSE AND TERRACING BUNDS MEASURING 60000 MTRS. AS HAS BEEN MENTIONED IN THE VALUATION REPORT, COPY OF WHICH WAS SUBMITTED BY THE ASSESSEE, MADE BY VIKAS DESAI. IN RESPECT OF THE TERRACING BUNDS , IT WAS STATED BY HIM THAT THE TERRACING BUNDS ARE MADE UP OF BIG RUBBLE STONES. THIS WAS DONE TO PROTECT WESTERN SIDE SLOPPY LAND AND ADMEASURING 60000 MTRS. IN THE CASE OF LAVLEEN SINGHAL VS. DCIT ( SUPRA ), THE TRIBUNAL HAS NOT DEALT WITH THE ISSUE WHE THER THE LAND WAS CULTIVABLE OR UNCULTIVABLE. THE LAND MUST BE CULTIVABLE AS HAS BEEN HELD BY US EARLIER. EVEN THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RAJA BENOY KUMAR SAHAS ROY, 32 ITR 48 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) 466 ( SUPRA ) HAS NOT BEEN REFERRED TO AND DI SCUSSED IN THIS CASE WHICH DEFINES WHAT DOES AGRICULTURE MEAN. 17.16 IN THE CASE OF GEMINI PICTURES CIRCUIT P. LTD. VS. CIT, 130 ITR 686 THE HON'BLE MADRAS HIGH COURT HELD AS UNDER : HELD, THAT THE CIRCUMSTANCES RELIED ON BY THE REVENUE SUCH AS THE ENVI RONMENT AND SITUATION OF THE LAND, THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE AND THE HIGH PRICE PAID, ETC., WERE NOT SUFFICIENT TO DISLODGE THE PRESUMPTION ARISING FROM THE USER OF THE LAND FOR AGRICULTURAL PURPOSE. THE ASSESSMENT OF THE LAND TO URBAN LAND TAX WAS COMPATIBLE WITH THE ASSESSEES CONTENTION IN VIEW OF THE WIDE DEFINITION OF THE TERM URBAN LAND UNDER THE TAMIL NADU ACT NO. 12 OF 1966. THE FACT THAT FROM 1953 TILL THE DATE OF SALE THE LAND WAS USED AS GARDEN AND THE FURTHER FACT THAT THE CORPORATION RECORDS SHOWED THAT VEGETABLES WERE GROWN ON THE LAND SHOWED THAT THE LAND WAS GARDEN LAND RETAINING ITS AGRICULTURAL CHARACTER. IT WAS NOT A CAPITAL ASSET WITHIN THE MEANING OF S. 2(14) AND THE SURPLUS ARISING ON ITS SALE WAS NOT AS SESSABLE TO CAPITAL GAINS TAX. THIS DECISION RELATES TO THE PROVISION OF SEC. 2(14) BEFORE AMENDMENT MADE IN 1970. THIS DECISION PUTS THE BURDEN ON THE REVENUE TO PROVE THAT THE LAND IS NOT ACTUALLY USED FOR AGRICULTURAL PURPOSE. ON THE FACTS, THIS DEC ISION, IN OUR OPINION, IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE AS IN THIS CASE THERE ARE EVIDENCES THAT ONLY PART OF THE LAND CONTAINS GROWN TREES AND REST OF THE LAND IS HILLY AND ROCKY AND IS NOT CAPABLE OF CULTIVATION. 17.17 IN THE CASE OF ITO, INDORE VS. ASHOK SHUKLA , 139 ITD 666 (INDORE) THE HON'BLE ITAT INDORE BENCH TOOK THE VIEW THAT THERE IS NO REQUIREMENT IN THE ACT THAT ONLY SELF - CULTIVATED LAND WOULD BE TREATED AS AGRICULTURAL LAND. THE QUESTION INVOLVED IN THIS DECISION IS ENTIRELY DIFF ERENT AND THERE IS NO DISPUTE IN THE CASE OF THE ASSESSEE FOR DETERMINING THE AGRICULTURAL LAND THERE SHOULD BE CULTIVATION BY THE ASSESSEE OR BY THIRD PARTY. 49 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) 9.6.12 IN THE CASE OF CIT VS. P.C. JOSHI & B.C. JOSHI, 202 ITR 1017 (BOM) ( SUPRA ) THE HON'BLE HI GH COURT TOOK THE VIEW THAT THE TEST LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CWT VS. OFFICER - IN - CHARGE (COURT OF WARDS), 105 ITR 133 (SC) ( SUPRA ) MUST BE CONSIDERED FOR DETERMINING WHETHER THE LAND IS AN AGRICULTURAL LAND. THE HON'BLE SUPREM E COURT IN THAT CASE HAS CATEGORICALLY LAID DOWN THAT ENTRIES IN THE REVENUE RECORD ARE GOOD PRIMA FACIE EVIDENCES THOUGH THEY MAY NOT BE CONCLUSIVE. THEREFORE, IN VIEW OF THIS DECISION, THE REVENUE RECORDS ARE NOT CONCLUSIVE. THE CHARACTER OF THE LAND W ILL DEPEND ON WHAT IS THE ACTUAL NATURE OF THE LAND. 17.18 WE HAVE PERUSED THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SMT. DEBBIE ALEMAO & JOAQUIM ALEMAO, 331 ITR 59 (BOM) ( SUPRA ). WE NOTED THAT IN THIS CASE THE ASSESSEE SOLD THE LAND. ASSESSEE AND HIS WIFE FILED SEPARATE RETURN CLAIMING EXEMPTION OF CAPITAL GAINS ARISING OUT OF THE SALE OF THE AGRICULTURAL LAND. THE AO BROUGHT CAPITAL GAINS TO TAX ON THE GROUND THAT LAND HAD NO AGRICULTURAL POTENTIAL AND THE FACT THAT IT WAS SOLD AT NEARLY 10 TIMES THE PURCHASE PRICE WITHIN 2 YEARS FROM ITS PURCHASE AND IT WAS PURCHASED BY THE PURCHASER FOR THE PURPOSE OF A BEACH RESORT SHOWED THAT THE LAND WAS NOT AN AGRICULTURAL LAND. WHEN THE MATTER TRAVELLED TO THE HIGH COURT, THE HON'BL E HIGH COURT TOOK THE VIEW W HETHER A CERTAIN PIECE OF LAND IS AGRICULTURAL OR NON - AGRICULTURAL LAND IS A QUESTION OF FACT AND THE FINDING ON QUESTION OF FACT RECORDED BY THE TRIBUNAL WAS FINAL. THE FINDING WAS NEITHER PERVERSE NOR WAS IT ARRIVED AT BY WRONG APPLICATION OF ANY PRINCIPLE OF LAW AND IT WAS NOT OPEN TO THE COURT TO INTERFERE IN THE POSSIBLE FINDING OF FACT IN AN APPEAL U/S 260A OF THE INCOME TAX ACT, 1961. IF AN AGRICULTURAL OPERATION DOES NOT RESULT IN GENERATION OF SURPLUS THAT CANNOT BE A GROUND TO SAY THAT THE LAND WAS NOT USED FOR AGRICULTURAL PURPOSE. IT WAS FURTHER OBSERVED THAT THE LAND WAS SHOWN IN THE REVENUE RECORDS AS USED FOR AGRICULTURAL PURPOSES AND NO PERMISSION WAS EVER OBTAINED FOR NON - AGRICULTURAL 50 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) USE BY THE ASSESSEE. PERMISSION FOR NON - AGRICULTURAL USE WAS OBTAINED FOR THE FIRST TIME BY THE PURCHASER. THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE TRIBUNAL. THIS DECISION, WE NOTED, CONFIRMED THE ORDER OF THE TRIBUNAL AS THE TRIBUNAL HAS GIVEN A FINDING OF FACT. THE HON'BLE HIGH COURT HAD NO OCCASION TO CONSIDER THE QUESTION WHETHER NON - CULTIVABLE LAND CAN BE REGARDED TO BE AGRICULTURAL LAND. THUS, THIS DECISION, IN OUR OPINION, WILL NOT BE APPLICABLE TO THE FACTS OF THE CASE BEFORE US. 17.19 IN THE CASE OF CIT VS. MINGUEL CHANDRA PAIS, 282 ITR 618 (BOM) WE NOTED THAT THE HON'BLE HIGH COURT HELD AS UNDER : THE EXPRESSION AGRICULTURAL LAND IS NOT DEFINED IN THE ACT, AND WHETHER A PIECE OF LAND IS AGRICULTURAL LAND OR NOT HAS TO BE DETERMINED BY USING THE TESTS OR METHODS LAID DOWN BY THE SUPREME COURT IN THE CASE OF SARIFABIBI MOHMED IBRAHIM V. CI T [1993] 204 ITR 631. THE TESTS LAID DOWN ARE AS FOLLOWS : (1) WHETHER THE LAND WAS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL AND WHETHER IT WAS SUBJECT TO THE PAYMENT OF LAND REVENUE; (2) WHETHER THE LAND WAS ACTUALLY OR ORDINARILY USED FOR AGRICULTURAL PURPOSES AT OR ABOUT THE RELEVANT TIME; (3) WHETHER SUCH USER OF THE LAND WAS FOR A LONG PERIOD OR WHETHER IT WAS OF A TEMPORARY CHARACTER OR BY ANY STOPGAP ARRANGEMENT; (4) WHETHER THE INCOME DERIVED FROM THE AGRICULTURAL OPERATIONS CARRIED ON I N THE LAND BORE ANY RATIONAL PROPORTION TO THE INVESTMENT MADE IN PURCHASING THE LAND; (5) WHETHER THE PERMISSION UNDER SECTION 65 OF THE BOMBAY LAND R EVENUE CODE WAS OBTAINED FOR THE NON - AGRICULTURAL USE OF THE LAND AND IF SO, WHEN AND BY WHOM (THE VENDOR OR THE VENDEE) ; WHETHER SUCH PERMISSION WAS IN RESPECT OF THE WHOLE OR A PORTION OF THE LAND; IF THE PERMISSION WAS IN RESPECT OF A PORTION OF THE LA ND AND IF IT WAS OBTAINED IN THE PAST, WHAT W A S THE NATURE OF THE USER OF THE SAID PORTION OF THE LAND ON THE MATERIAL DATE; (6) WHETHER THE LAND, ON THE RELEVANT DATE, HAD CEASED TO BE PUT TO AGRICULTURAL USE; IF SO, WHETHER IT WAS PUT TO AN ALTERNATIVE U SE; WHETHER SUCH CESSER AND/OR ALTERNATIVE USER WAS OF A PERMANENT OR TEMPORARY NATURE ; (7) WHETHER THE LAND, THOUGH ENTERED IN THE REVENUE RECORDS, HAD NEVER BEEN ACTUALLY USED FOR AGRICULTURE, THAT IS, IT HAD NEVER BEEN PLOUGHED OR TILLED ; WHETHER THE OWNER MEANT OR INTENDED TO USE IT FOR AGRICULTURAL PURPOSES ; (8) WHETHER THE LAND WAS SITUATED IN A DEVELOPED AREA ; WHETHER ITS PHYSICAL CHARACTERISTICS, SURROUNDING SITUATION AND USE OF THE LANDS IN THE ADJOINING AREA WERE SUCH AS WOULD INDICATE THAT TH E LAND WAS AGRICULTURAL; (9) WHETHER THE LAND ITSELF WAS DEVELOPED B Y PLOTTING AND PROVIDING ROADS AND OTHER FACILITIES ; (10) WHETHER THERE WERE ANY PREVIOUS SALES OF PORTIONS OF THE LAND FOR NON - AGRICULTURAL USE ; (11) WHETHER PERMISSION UNDER SECTION 63 OF THE BOMBAY TENANCY AND 51 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) AGRICULTURAL LANDS ACT, 1948, WAS OBTAINED BECAUSE THE SALE OR INTENDED SALE WAS IN FAVOUR OF NON - AGRICULTURIST; I F SO, WHETHER THE SALE OR INTENDED SALE TO S UC H NON - AGRICULTURIST WAS FOR NON - AGRICULTURAL OR AGRICULTURAL USER; (1 2) WHETHER THE LAND WAS SOLD ON YARDAGE OR ON ACREAGE BASIS ; (13) WHETHER AN AGRICULTURIST WOULD PURCHASE THE LAND FOR AGRICULTURAL PURPOSES AT THE PRICE AT WHICH THE LAND WAS SOLD AND WHETHER THE OWNER WOULD HAVE EVER SOLD THE LAND VALUING IT AS A PROPER TY YIELDING AGRICULTURAL PRODUCE ON THE BASIS OF ITS YIELD. AT THE SAME TIME, THE SUPREME COURT HAS STATED THAT WHETHER A LAND IS AN AGRICULTURAL LAND OR NOT IS ESSENTIALLY A QUESTION OF FACT. THE QUESTION HAS TO BE ANSWERED IN EACH CASE HAVING REGARD TO T HE FACTS AND CIRCUMSTANCES OF THAT CASE. THERE MAY BE FACTORS BOTH FOR AND AGAINST A PARTICULAR POINT OF VIEW. THE COURT HAS TO ANSWER THE QUESTION ON A CONSIDERATION OF ALL OF THEM BY A PROCESS OF EVALUATION AND THE INFERENCE HAS TO BE DRAWN ON A CUMULATI VE CONSIDERATION OF ALL THE RELEVANT FACTS. THE SUPREME COURT HAS FURTHER STATED THAT NOT ALL THESE FACTORS OR TESTS WOULD BE PRESENT OR ABSENT IN ANY CASE AND THAT IN EACH CASE ONE OR MORE OF THOSE FACTORS MAY MAKE APPEARANCE AND THAT THE ULTIMATE DECISIO N WILL HAVE TO BE REACHED ON A BALANCED CONSIDERATION OF TH E TOTALITY OF THE CIRCUMSTANCES. A QUESTION OF FACT BECOMES A QUESTION OF LAW, IF THE FINDING IS EITHER WITHOUT ANY EVIDENCE OR MATERIAL, OR THE FINDING IS CONTRARY TO EVIDENCE OR IS PERVERSE OR THERE IS NO DIRECT NEXUS BETWEEN THE CONCLUSION AND THE FACTS UPON WHICH THAT CONCLUSION IS BASED. A PERVERSE FINDING IS A FINDING WHERE THERE IS NO EVIDENCE TO SUPPORT IT OR IT IS BASED ON MATERIAL WHICH IS IRRELEVANT OR PARTLY RELEVANT AND PARTLY IRRELEV ANT OR IT IS BASED ON CONJECTURES OR SURMISES OR PARTLY ON THESE AND PARTLY ON EVIDENCE, OR A FINDING WHICH IS SO PERVERSE AND UNREASONABLE THAT NO PERSON ACTING JUDICIALLY AND PROPERLY INSTRUCTED IN LAW WOULD HAVE ARRIVED AT IT. THE ASSESSEE S S OL D THEIR ANCESTRAL PROPERTY TO S IN MAY 1995. THE ASSESSEES DID NOT INCLUDE THE GAINS DERIVED FROM THE SALE ON THE GROUND THAT THE LAND WAS AGRICULTURAL. THE ASSESSING OFFICER HELD THAT THEY WE RE LIABLE TO PAY LONG TERM CAPITAL GAINS TAX. THE TRIBUNAL HELD THAT THE LAND WAS AGRICULTURAL BECAUSE THE ASSESSEES HAD PRODUCED RECEIPTS FOR PAYMENT OF LAND REVENUE WHICH COULD NOT BE IGNORED. ADMITTEDLY, THE SUBJECT LAND WAS SITUATED IN A VILLAGE AND AT A DISTANCE OF ABOUT 15 KMS. FROM THE MUNICIPAL LIMITS. THE ASSESSEES HA D PRODUCED AN AWARD OF THE LAND ACQUISITION OFFICER AND ALL DOCUMENTS PRODUCED BY THE ASSESSEES SHOWED THAT THE ACQUIRED LAND WAS AGRICULTURAL. THE WITNESSES WHOSE AFFIDAVITS WERE PRODUCED HAD CLEARLY STATED THAT LABOURERS WERE SEEN WORKING IN THE SUBJECT LAND UNTIL IT WAS SOLD TO S; THE LAND WAS CLASSIFIED AS AGRICULTURAL LAND IN THE REVENUE RECORDS, AND IT WAS SUBJECTED TO THE PAYMENT OF LAND REVENUE. IT HELD THAT THE GAINS COULD NOT BE TAXED AS CAPITAL GAINS. ON APPEAL TO THE HIGH COURT: 52 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) HELD, DISMISSING THE APPEAL, THAT THE TRIBUNAL WAS RIGHT UPON CONSIDERATION OF ALL THE TESTS OR FACTORS L AID DOWN BY THE SUPREME COURT, IN COMING TO THE CONCLUSION THAT THE SUBJECT LAND WAS AGRICULTURAL AND THE SALE OF THE SAME DID NOT INVITE THE PAYMENT OF CAPI TAL GAINS TAX. THIS DECISION, IN OUR VIEW SUPPORTS THE CASE OF THE REVENUE THAT EXCEPT THE TREES LYING ON THE LAND, THE LAND IS NOT ACTUALLY OR ORDINARILY USED FOR AGRICULTURAL PURPOSES FOR VARIOUS YEARS AS THE LAND IS NOT CULTIVABLE. IN THIS DECISION, THE HON'BLE HIGH COURT HAS RELIED ON THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF SARIFABIBI MOHMED IBRAHIM VS. CIT, 204 ITR 631. IN THE CASE OF SARIFABIBI MOHMED IBRAHIM VS. CIT, 204 ITR 631 ( SUPRA ) WE NOTED THAT THE HON'BLE SUPRE ME COURT HAS CATEGORICALLY HELD THAT WHETHER A PIECE OF LAND IS AGRICULTURAL OR NOT IS ESSENTIALLY A QUESTION OF FACT . SEVERAL TESTS HAVE BEEN EVOLVED IN THE DECISION OF THE HON'BLE SUPREME COURT BUT ALL OF THEM ARE MORE IN THE NATURE OF GUIDELINES. THE QUESTION HAS TO BE ANSWERED IN EACH CASE HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THAT CASE. THERE MAY BE FACTORS BOTH FOR AND AGAINST A PARTICULAR POINT OF VIEW. THE COURT HAS TO ANSWER THE QUESTION ON A CONSIDERATION OF ALL OF THEM BY A PROCESS OF EVALUATION AND INFERENCE HAS TO BE DRAWN ON A CUMULATIVE CONSIDERATION OF ALL THE RELEVANT FACTORS . IN THIS CASE, SINCE THE LAND WAS NOT USED FOR AGRICULTURAL PURPOSE, THE HON'BLE SUPREME COURT TOOK THE VIEW THAT LAND NOT AGRICULTURAL THOUGH ENTERED IN THE REVENUE RECORD AS AGRICULTURAL. IN VIEW OF THIS DECISION AND THE DECISION OF THE HON'BLE SUPREM E COURT IN THE CASE OF CWT VS. OFFICER - IN - CHARGE (COURT OF WARDS), 105 ITR 133 (SC) ( SUPRA ) IT CAN BE SAID THAT IF LAND IS ASSESSED TO REVENUE AS AGRICULTURAL LAND UNDER THE STATE REVENUE LAW, IT MAY BE A STRONG PIECE OF EVIDENCE TO DETERMINE THE CHARACTER OF THE LAND BUT IT IS NOT A CONCLUSIVE EVIDENCE. 18. IN VIEW OF THE AFORESAID DECISION, WE ARE OF THE VIEW THAT FOR BECOMING AN AGRICULTURAL LAND 53 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) I) I T IS NECESSARY THAT THE LAND M UST BE CULTIVABLE I.E. IT MUST BE CAPABLE OF CULTIVATION. II) T HE REVENUE RE CORD EVEN THOUGH ARE GOOD EVIDENCE TO DETERMINE THE CHARACTER OF THE LAND BUT ARE NOT CONCLUSIVE EVIDENCE. III) A CTUAL OR ORDINARY USE OF THE LAND FOR AGRICULTURAL PURPOSE AT THE TIME OF SALE AND PRIOR TO THAT IS A RELEVANT FACT TO HOLD THAT THE LAND IS AN AGRI CULTURAL LAND. IV) M ERELY TEMPORARY STOPPAGE OF THE AGRICULTURAL OPERATION IN THE LAND WILL NOT MAKE IT TO BE A NON - AGRICULTURAL LAND. V) C HARACTER OF THE LAND IS NOT DETERMINED BY THE NATURE OF THE PRODUCTS RAISED. S O LONG AS THE LAND IS USED OR CAN BE USED FOR RAISING VALUABLE PLANTS OR CROPS OR TREES OR ANY OTHER PURPOSE OF HUSBANDRY , THE LAND WILL BE REGARDED TO BE AN AGRICULTURAL LAND. VI) THE SITUATION OF THE LAND IN A VILLAGE OR IN AN URBAN AREA IS NOT BY ITSELF DETERMINATIVE OF ITS CHARACTER. WHETHER THE L AND HAS BEEN DEVELOPED BY PLOTTING AND PROVIDING ROADS AND OTHER FACILITIES. 18.1 TO DETERMINE THE CORRECT CHARACTER OF THE LAND , ON THE REQUEST OF BOTH THE PARTIES WE DECIDED TO VISIT THE LAND PERSONALLY BY EXERCISING THE POWER U/S 255(6) AND ACCORDINGLY THIS BENCH VISITED ON 1.4.2014 ALONGWITH SHRI JITENDRA JAIN, ADV. CAS ON BEHALF OF THE ASSESSEE AS WELL AS SMT. SONAL SONKAVDE, LD. DR ON BEHALF OF THE DEPARTMENT. WE NOTED THAT THE IMPUGNED PROPERTY IS BOUNDED BY A SMALL RIVERLET FROM SOUTH S IDE WHICH JOINS THE ARABIAN SEA. ARABIAN SEA ALSO DEMARKS ITS LIMIT FROM WEST SIDE. ALMOST ALL THE AREA OF THE LAND IS HILLY AND ROCKY, EVEN SO MUCH SO THAT THERE IS NO EASY ACCESS TO THE WHOLE OF THE PROPERTY AND WE HAD TO GO THROUGH ONE SMALL ROCKY WAY . NO AGRICULTURAL ACTIVITIES OR OPERATIONS BEING CARRIED OUT ON THE LAND WERE FOUND. WE NOTED NO SOURCE OF WATER PRESENT FOR REGULAR AGRICULTURAL ACTIVITIES EVEN 54 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) THOUGH THERE IS A SMALL NALLA IN THE PROPERTY FLOWING DOWNWARD AND THE JOINS THE RIVERLET ON THE SOUTH BOUNDARY. THIS NALLA WAS TOTALLY DRY AND IT WAS EXPLAINED TO US THAT IT IS FUNCTIONAL ONLY IN THE RAINY SEASON. THE LAND DOES NOT HAVE EVIDENCE OF IT BEING CULTIVATED FOR SEVERAL YEARS. EVEN IN OUR VIEW CULTIVATION ON MOST PART OF THE LAND IS NOT POSSIBLE. THERE ARE CERTAIN GROWN TREES SPARSELY LOCATED AND B USHES LIKE KOKUM, MANGO, CASHEW, JACKFRUIT. PART OF THE LAND CONSISTS OF THICK BUSHES APPEARING TO HAVE NATURALLY GROWN SINCE MANY DECADES WHICH MADE IT DIFFICULT TO MOVE AROUND THE PROPE RTY. THERE IS A HOUSE MEASURING ABOUT 72 SQ. MTRS. WITHIN THE LAND IN WHICH SOME OF THE PEOPLE WERE PUTTING UP. THE LAND APPEARS TO BE NON - CULTIVABLE. THE LD. DR ALSO SUBMITTED HER REPORT AND THE COMMENTS OF THE COUNSEL OF THE ASSESSEE WERE ALSO ASKED F OR. THE ASSESSEE SUBMITTED THAT INCOME TAX ACT DOES NOT PROVIDE FOR ALL SEASON REGULAR WATERING. THERE ARE DRY CROPS WHICH DO NOT REQUIRE 12 MONTHS WATERING. THIS REGION GETS HEAVY RAINFALL DURING MONSOON FURTHER SUPPLEMENTED BY RIVER AND NALLA THROUGHO UT THE YEAR AND IRRIGATION IS NOT A CONDITION FOR AGRICULTURE AND RAINFALL AND RIVER WATER IS SUFFICIENT. IT WAS STATED THAT EVEN AFTER 7 YEARS FROM THE DATE OF SALE, THE NUMBER OF DRY CROP TREES VISIBLE WERE MORE THAN 3500. CERTIFICATE OF LOCAL AUTHORIT Y SHOWING EXISTENCE OF 3500 TREES IS BASED ON OLD RECORD PRIOR TO PREVIOUS YEAR 2006 - 07. FROM THE SUBMISSION OF THE ASSESSEE IT IS NOT DENIED THAT THERE ARE MORE THAN 3500 TREES ON TOTAL LAND ADMEASURING 2,18,250 SQ. MTRS. THE LAND DOES NOT HAVE A NY CROP PED AREA EXCEPT DRY CROP. CERTIFICATE HAS BEEN ISSUED BY THE OFFICER IN - CHARGE, LAND RECORDS ON 22.7.2006. THESE DRY CROPS ARE ONLY ON PART OF THE AREA. REST OF THE AREA, IT IS APPARENT, HAS NOT BEEN CULTIVATED FOR THE LAST SEVERAL YEARS AND THE IMPUGNED LAND LEAVING ASIDE THE TREES WHICH ARE STANDING THEREON, IN OUR OPINION, IS NOT CULTIVABLE. IF THE LAND IS NOT CULTIVABLE, WE ARE OF THE VIEW THAT NO AGRICULTURAL OPERATIONS CAN BE CARRIED OUT. DURING THE COURSE OF THE HEARING WE ASKED T HE LD. ADVOCATE OF THE ASSESSEE WHETHER THERE IS ANY DECISION PRONOUNCED BY ANY COURT WHICH HAS 55 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) HELD THAT A BARREN AND UNCULTIVABLE LAND CAN BE REGARDED TO BE AN AGRICULTURAL LAND. OPPORTUNITIES WERE GIVEN FROM TIME TO TIME BUT THE LD. AR EXPRESSED HIS IN ABILITY TO BRING ANY DECISION ON THIS ISSUE WHICH SUPPORTS HIS CASE. IT IS NOT DENIED EVEN BY THE REVENUE THAT PART OF THE LAND CONSISTS OF DRY CROP I.E. TREES OF CASHEW, MANGO, JACK, KOKUM AND COCONUT. TO THE EXTENT THESE TREES ARE STANDING ON THE LAND, THIS PORTION OF THE LAND, IN OUR OPINION, HAS TO BE REGARDED TO BE AGRICULTURAL LAND AS THIS PORTION OF THE LAND IS BEING USED FOR THE PURPOSE OF AGRICULTURE. NEITHER THE ASSESSEE NOR THE REVENUE PRODUCED BEFORE US THE EXACT MEASUREMENT OF THE LAND ON WHI CH THE TREES ARE STANDING AND OUT OF WHICH DRY CROP IS GROWN. TO THE EXTENT THE LAND IS ACTUALLY USED FOR DRY CROP, THE LAND HAS TO BE REGARDED TO BE AN AGRICULTURAL LAND. SINCE THERE ARE APPROXIMATELY 3500 TREES STANDING ON THE LAND, WHICH IS NOT DENIED EVEN BY THE REVENUE AND HAS BEEN ACCEPTED BY THE LD. AR, WE, THEREFORE, TO THE BEST OF OUR KNOWLEDGE WE ESTIMATE THAT ATLEAST 10 MTRS AREA IS REQUIRED FOR ONE FRUIT TREE AND THEREFORE, THERE ARE APPROXIMATELY 35000 SQ.MTRS AREA OF THE LAND WHICH CAN BE R EGARDED TO BE CULTIVABLE. ON THE UPPER SIDE WE ESTIMATE 1/5 TH OF THE LAND I.E. ABOUT 42,000 SQ.MTR TO BE CULTIVABLE LAND THEREFORE, WE HOLD THIS PORTION OF THE LAND TO BE THE AGRICULTURAL LAND. THE BALANCE 4/5 TH OF THE LAND IN OUR OPINION CANNOT BE REGARD ED TO BE THE AGRICULTURAL LAND. WE ACCORDINGLY, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO TREAT ONLY 4/5 TH OF THE LAND TO BE THE CAPITAL ASSET AND THE CONSIDERATION RECEIVED TO THAT EXTENT BE TREATED AS IF SAID CONSIDERATION HAS BEEN RECEIVED ON THE TRANSFER OF CAPITAL ASSET AND THE CAPITAL GAIN ON THE TRANSFER OF SUCH LAND BE COMPUTED IN ACCORDANCE WITH THE PROVISION OF THE INCOME TAX ACT TO THE EXTENT EACH OF THE CO - OWNER HAS THE SHARE PROPORTIONATELY THE CAPITAL GAIN SO COMPU TED ON 4/5 TH OF THE TOTAL CONSIDERATION BE ASSESSED IN THE HANDS OF RESPECTIVE ASSESSEE. THUS THE GROUND TAKEN BY THE REVENUE ARE PARTLY ALLOWED. 56 ITA NOS.129 - 130,144,156 - 161,174 - 175,178/PNJ/2013 & CO NOS. 25 - 26,31 - 37,40 - 41,59/PNJ/2013 (ASST. YEAR : 2007 - 08) 19. IN THE RESULT, ALL THE APPEALS FILED BY THE REVENUE ARE PARTLY ALLOWED WHILE ALL THE C.OS FILED BY THE R ESPECTIVE ASSESSEES ARE ALSO PARTLY ALLOWED FOR STATISTICAL PURPOSE S . ORDER PRONOU NCED IN THE OPEN COURT ON 06 .06.2014. SD/ - (D.T.GARASIA) JUDICIAL MEMBER SD/ - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 06 .06. 201 4 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT S (I) SHRI PUNDALIK K. KHOUNTE, (II) SMT. SUDHA P. KHOUNTE, (III) SHRI GAJANAN N. GUINDE, (IV) SHRI SHAILESH G. GUINDE, (V) SMT. ARCHANA S. GUINDE, (VI) SHRI RADHESH G. GUINDE, (VII) SMT. SONIA R. GUINDE, (VIII) SHRI GOPAL V. PRABHU, (IX) SHRI PRABHAKAR K. PRABHU SHASTRI, (X) SHRI SHANKAR L. DALAL, (XI) SMT. GAURI S. DALAL AND (XII) SHRI DURGADAS K. PRABHU (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER