Sh. Sunil Kumar Sood, Panchkula V. ACIT, Panchkula

ITA 1225/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60823 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-04-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 19-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Keywords: Capital asset; Business income; Earning of tax free income; Advance ruling
• Section: 2(14); 63; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.998/CHD/2010 ASSESSMENT YEAR : 2007-08 SHRI SUNIL KUMAR SOOD, V DCIT, HOUSE NO. 143, PANCHKULA CIRCLE, SECTOR 7,PANCHKULA. PAN: ACJPS-6744E & ITA NO.1225/CHD/2011 ASSESSMENT YEAR : 2008-09 SHRI SUNIL KUMAR SOOD, V ACIT, HOUSE NO. 143, PANCHKULA CIRCLE, SECTOR 7,PANCHKULA. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.N.SINGLA RESPONDENT BY : SMT. JAISHREE SHARMA DATE OF HEARING : 24.04.2012 DATE OF PRONOUNCEMENT : 27.04.2012 ORDER PER MEHAR SINGH, AM THE PRESENT TWO APPEALS FILED BY THE SAME ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 03.05.2012 AND 21. 10.2011 RESPECTIVELY PASSED BY THE LD. CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE ACT'). 2. AS THE FACTS AND GROUNDS OF APPEAL IN BOTH THE A PPEALS ARE SIMILAR, THEREFORE, FOR THE SAKE OF CONVENIENCE , GROUNDS AS RAISED IN ITA NO.998/CHD/2010 ARE REPRODUCED HEREUN DER: 1. THAT THE ORDER OF LD. CIT(A) IS BAD AGAINS T THE FACTS AND LAW. 2 2. THAT THE LD. CIT(A) HAS WRONGLY UPHELD THE TREATMENT OF GAIN ON SALE OF EXEMPT ASSET AS BUSINESS ACTIVITY OF THE APPELLANT. 3. THAT THE LD. CIT(A) HAS WRONGLY UPHELD ADDITION OF RS.1,13,23,199/- ON ACCOUNT OF GAIN ON AGRICULTURAL LAND SITUATED OUTSIDE SPECIFIED AREA. 4. THE APPELLANT CARVES LEAVE TO ADD, AMEND OR WITHDRAW ANY GROUNDS OF APPEAL BEFORE THE FINAL HEARING. 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDIN GS, BOTH LD. 'AR' AND LD. 'DR' WERE OF THE VIEW THAT THE ISSUE I S SQUARELY COVERED IN ASSESSEE'S OWN CASE BY THE ORDER OF THE TRIBUNAL IN ITA NO. 227 & 228/CHD/2010, A.Y. 2005-06 AND 200 6- 07, DATED 30.03.2012. 4. WE HAVE CAREFULLY PERUSED THE FACTS OF THE C ASE, RELEVANT RECORDS. ON PERUSING THE DECISION REFERRE D TO ABOVE AND STATED BY THE LD. 'AR', WE ARE OF THE OPINION T HAT THE ISSUES RAISED IN THESE TWO APPEALS ARE SQUARELY COV ERED BY THE ORDER IN ASSESSEE'S OWN CASE. FOR READY REFERE NCE, THE CONTENTS OF THE SAME ARE REPRODUCED HEREUNDER : THE CAPTIONED TWO APPEALS HAVE BEEN FILED BY THE S AME ASSESSEE, AGAINST THE CONSOLIDATED ORDER DATED 29.01.2010 PASSED BY THE LD. CIT(A), PANCHKULA U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE AC T') FOR THE ASSESSMENT YEARS 2005-06 & 2006-07. AS THE FACTS AND THE ISSUES, INCLUDING THE GROUNDS OF APPE AL, IN BOTH THE APPEALS ARE IDENTICAL, THE SAME ARE TAKEN UP TOGETHER, FOR DISPOSAL, FOR THE SAKE OF CONVENIENCE . 2. THE GROUNDS OF APPEAL, AS RAISED IN ITA NO. 227/CHD/2010, ARE REPRODUCED HEREUNDER : 1. THAT THE ORDER OF LD. CIT(A) IS BAD AND AGAINST THE FACTS AND LAW. 3 2. THAT THE LD. CIT(A) HAS ERRED IN NOT TREATING TH E RURAL AGRICULTURAL LAND BEYOND MUNICIPAL LIMITS, SO LD DURING THE YEAR, AS AGRICULTURAL LAND WITHIN THE MEANING OF SECTION 2(14)(III) OF THEIA,1961. 3. THAT THE LD. CIT(A) HAS ERRED IN ALLEGEDLY TREAT ING THE PROFITS FROM SALE OF RURAL AGRICULTURAL LAND BEYOND MUNICIPAL LIMITS AS INCOME FROM ADVENTURE IN THE NATURE OF TRADE. 4. THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ASSESSMENT WITHOUT CONSIDERING AND INTERPRETING ALL THE INFORMATION/SUBMISSION PLACED ON RECORDS AND WITHOUT GIVING PROPER OPPORTUNITY TO THE ASSESSEE O N THE MATTERS, ON WHICH ADDITIONS HAVE BEEN MADE. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, A LTER OR WITHDRAWN ANY GROUND OF APPEAL BEFORE FINAL HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E SOLD CERTAIN LANDS PURCHASED BY HIM IN THE STATE OF HIMACHAL PRADESH. THE ASSESSEE EARNED SHORT TERM CAPITAL GAINS OF RS.82,01,796/- ON THE SALES OF THE SE LANDS. THE ASSESSEE CLAIMED THAT THE LANDS IN QUES TION IS NOT A CAPITAL ASSET U/S 2(14)(III) OF THE INCOME -TAX ACT,1961 AND, HENCE, SURPLUS REALIZATION FROM THE S ALE OF SUCH LANDS, IS NOT TAXABLE INCOME. THE AO, MADE A REFERENCE TO THE DEFINITION OF THE TERM CAPITAL AS SET, AS PROVIDED U/S 2(14)(III) OF THE ACT AND AFTER PERUSA L OF VARIOUS DECISIONS OF HON'BLE HIGH COURTS AND SUPREM E COURT AND TREATED THE INCOME FROM THE SALE OF SUCH LANDS, AS BUSINESS INCOME. LD. CIT(A) UPHELD THE FINDINGS OF THE AO AND, HENCE, THE ASSESSEE FILED THESE TWO APPEALS BEFORE THE TRIBUNAL. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, THE LD. 'AR' CONTENDED THAT GROUND NO. 1 AND 5 ARE GENE RAL IN NATURE, HENCE, NO SEPARATE ADJUDICATION IS REQUIRED . ACCORDINGLY, THESE GROUNDS OF APPEAL ARE DISMISSED. 4 5. IN THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE U S, LD. 'AR' STATED THAT GROUND NOS. 2, 3 & 4 ARE INTER -LINKED AND HENCE, HE MADE A COMBINED SUBMISSION, IN RESPEC T OF SUCH GROUNDS OF APPEAL. LD. 'AR' REFERRED TO PAGE 16 & 17 OF THE PAPER BOOK FILED BY HIM AND ALSO REPORT D ATED 07.01.2008. PAGE 16 & 17 OF THE PAPER BOOK IS A LE TTER DATED 7.01.2008 ISSUED FROM THE OFFICE OF THE TEHSI LDAR, NALAGARH, TEHSIL NALAGARH, DISTRICT SOLAN, AND ADDR ESSED TO ASSISTANT COMMISSIONER OF INCOME-TAX, PANCHKULA CIRCLE, PANCHKULA. THE RELEVANT PART OF THE SAID LE TTER IS REPRODUCED HEREUNDER, FOR THE PURPOSE OF PROPER APPRECIATION OF ITS TEXTS AND NATURE THEREOF : SR.NO. 107-109 ISSUED TO SHRI SUNIL KUMAR SOOD OFFICE OF TEHSILDAR UNDER RTI ACT NALAGARH,DISTT.SOLAN SD/- NALAGARH 7 TH JANUARY,2008 PUBLIC INFORMATION OFFICER CUM SDO(C) NALAGARH DISTT.SOLAN (HP) 19/02 TO, ASSTT. COMMISSIONER OF INCOME TAX PANCHKULA CIRCLE, PANCHKULA. ON THE ABOVE CITED SUBJECT REFER YOUR OFFICE LETTER NO. ACIT/PKL/CIR/PKL/07-08/1A/3073 DATED 31.10.2007 AND IN THIS REGARD, WE HAVE GOT INVESTIGATED THE INFORM ATION FROM OUR FIELD EMPLOYEES AND THE REPORT IS AS UNDER : 1. COPY OF JAMABANDI OF LAND BEARING KHASRA 1341/3, 1341/2-1338-1339-1336-1337-1335-1319-1345/1, 1347/1 , IN VILLAGE BHATOLI KALAN IS PREPARED AND SUBMITTED. 3(A) THE ABOVE LAND DOES NOT FALL UNDER M.C.CORPORA TION, NAC. (B) NAGAR PANCHAYAT BADDI TO ABOVE KHASRA (LAND) TH E DISTANCE IS APPROX, 10 K.M. (C) DISTANCE OF LAND IS MORE THAN 8 KM. 4. THE LAND IS AWAY FROM NAGAR PANCHAYAT. THE DETA ILS OF CENSUS ARE NOT AVAILABLE. 5.(A) THE ABOVE SOLD LAND WAS USED FOR AGRICULTURA L PURPOSES BEFORE SELLING. (B) THE ABOVESAID LAND WAS USED FOR AGRICULTURAL PU RPOSES REGULARLY. (C) NOT APPLICABLE AND NOT RELATED TO OUR RECORDS. 5 (D) HIMACHALI AGRICULTURIST DOES NOT REQUIRE ANY PE RMISSION FROM GOVERNMENT WHILE BUYING OR SELLING OF LAND BUT IF THE PURCHASER IS NON-AGRICULTURIST THEN IT IS A NECESSI TY THAT HE HAS TO OBTAIN PERMISSION FROM GOVT. U/S 118 OF H.P. TENANCY AND LAND REFORMS RULES 1972. THE ABOVESAID LAND WAS AGRICULTURAL LAND AT THE TIME OF PURCHASE AND S ALE. (F) ON RELEVANT DATE THE ABOVE LAND WAS AGRICULTURA L LAND AND THE PURCHASER HAS PURCHASED THIS LAND FOR SETTI NG UP AN INDUSTRIAL UNDERTAKING AND WHEN THE INDUSTRY IS SET UP ON KHASRA NUMBER THEN LAND BECOMES NON-AGRICULTURE LAN D. (G) THE ABOVESAID LAND WAS REGULARLY USED FOR AGRIC ULTURAL PURPOSES. (H) THE ABOVE LAND FALLS UNDER RURAL AREA AND AT TH AT TIME WAS NOT DEVELOPED AND ALL THE LANDS SURROUNDING THE SE WERE USED FOR AGRICULTURAL PURPOSES. (I) ABOVE LAND HAS NOT DEVELOPED INTO ANY PLOTS AND ROADS. (J) NO (K) THE PERMISSION FOR PURCHASE OF LAND IS OBTAINED BY NON- AGRICULTURIST PURCHASER. (L) THE LAND WAS SOLD ACCORDING TO THE BIGHAS BISWA S AND NOT BY YARDS. (M) THE LAND IS PURCHASED AND SOLD ON THE BASIS OF AVERAGE VALUE. THEREFORE THE REPORT IS PREPARED AFTER INVESTIGATIN G THE REVENUE RECORDS AND IS SUBMITTED FOR FURTHER ACTION . 5(I). SIMILARLY, LD. 'AR' REFERRED TO PAGES 20 & 21 (ENGLISH VERSION OF PAGE 22). THIS LETTER WAS ISSUE D TO, SHRI SUNIL KUMAR SOOD, THE PRESENT APPELLANT, UNDER RTI ACT ON 19.2.2008. THOUGH THE LETTER IS IN HINDI LANGUAGE, THE ENGLISH VERSION OF THIS LETTER IS REPRODUCED HEREUN DER : WITH DUE RESPECT AND AS PER DIRECTIONS AND AFTER S EARCH OF REVENUE RECORDS AND A VISIT OF SITE THE ITEM WISE REPORT IS SUBMITTED AS UNDER: 1. ACCORDINGLY TO DIRECTIONS VILLAGE BHATOLI KALAN PARGANA DHARMPUR, TEHSIL NALAGARH, DISTT. SOLAN THE CERTIFI ED COPIES OF JAMABANDI OF LAND BEARING KHASRA NUMBER 1341/3, 1341/2, 1338-1339 - 1336 - 1337 - 1335 - 13 19 - 6 1345/1, 1347/1 HAVE BEEN PREPARED AND ENCLOSED WITH THE REPORT. 2.(A) THE ABOVE LAND DOES NOT FALL UNDER M.G. COR PORATION, N.A.C. (B) THE DISTANCE FROM NAGAR PANCHAYAT BADDI TO L AND IN ABOVE KHASRA NUMBER IS BETWEEN 8 TO 10 KM. (C) THE DISTANCE OF LAND IS MORE THAN 8 KM. (D) THE CENSUS RECORD IS NOT AVAILABLE IN PATWARKH ANA. 3. THE ABOVE SAID LAND AS PER REVENUE RECORDS IS C ULTIVABLE CHANGER AWAL BARANI LAND AND THE LAND TAXES ARE PAI D BY THE OWNERS TO THE GOVERNMENT. 4. THE SOLD LAND HAD BEEN USED FOR AGRICULTURAL PUR POSE. 5. ON SAID LAND THE AGRICULTURAL ACTIVITY HAD BEEN CARRIED OUT SINCE LONG TIME. 6. NOT APPLICABLE AND NOT RELATED TO RECORDS. 7. HIMACHALI AGRICULTURIST DOES NOT REQUIRE ANY PERMIS SION FROM GOVERNMENT WHILE BUYING OR SELLING OF LAND BUT IF THE PURCHASER IS NON-AGRICULTURIST THEN IT IS A NECESSI TY THAT HE HAS TO OBTAIN PERMISSION FROM GOVERNMENT U/S 118 OF H.P. TENANCY AND LAND REFORMS RULES 1972. THE ABOVE SAID LAND WAS AGRICULTURAL LAND AT THE TIME OF PURCHASE AND SALE. 8. ON RELEVANT DATE THE ABOVE LAND WAS AGRICULTURAL L AND AND THE LASER HAS PURCHASED THIS LAND FOR SETTING UP AN INDUSTRIAL UNIT AND 'WHEN THE INDUSTRY IS SET UP ON KHASRA NUMBER THEN THAT LAND BECOMES NON-AGRICULTURE LAND. 9. THE ABOVE SAID LAND WAS REGULARLY USED FOR AGRICULT URE PURPOSES. 10. THE ABOVE LAND FALL UNDER RURAL AREA AND AT THAT T IME WAS NOT DEVELOPED AND ALL THE LANDS SURROUNDING THESE L ANDS WERE USED FOR AGRICULTURAL PURPOSES. 7 11. NO 12 NO 13. THE PERMISSION FOR PURCHASE OF LAND IS OBTAINED BY NON- AGRICULTURIST PURCHASER. 14. THE LAND WAS SOLD ACCORDING TO THE BIGHAS BIS WAS AND NOT BY YARDS. 15. THE LAND IS PURCHASED AND SOLD BASED ON THE AVERAGE VALUE. THEREFORE THE REPORT AFTER SCRUTINY OF REVENUE RECO RDS AND CERTIFIED COPIES OF REVENUE RECORDS HAVE BEEN PREPA RED AND IS FORWARDED FOR FURTHER NECESSARY ACTION. 5(II). LD. 'AR' ALSO REFERRED TO PAGE 1 OF THE PA PER BOOK WHICH CONTAINS DETAILS OF AGRICULTURAL LANDS, PURCH ASED DURING THE FINANCIAL YEAR 2003-04, WHICH WAS PARTLY SOLD IN FINANCIAL YEAR 2004-05 AND IN FINANCIAL YEAR 200 5-06. IT WAS STATED BY LD. 'AR' THAT NO NON-HIMACHALI CA N PURCHASE AGRICULTURE LAND IN THE STATE OF HIMACHAL PRADESH. 6. LD. 'DR', ON THE OTHER HAND, PLACED RELIANCE ON THE ORDER PASSED BY THE AO AS WELL AS BY THE CIT(A). 7. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT RECORD, INCLUDIN G PAPER BOOK FILED BY THE ASSESSEE. THE AO, AFTER A REFERE NCE TO THE DECISIONS IN THE CASE OF SARIFABIBI MOHMED IBRA HIM & OTHERS V CIT (2004) 204 ITR 631 (S.C); BEGUMPET PAL ACE 105 ITR 133 ; SIDHARATH J.DESAI 139 ITR 628 (GUJ) ; & CIT V V.A.TRIVEDI 172 ITR 95 (BOM) HELD THAT THE LA ND SOLD BY THE APPELLANT IS NOT AGRICULTURAL LAND. THE FINDINGS OF THE AO AS INCORPORATED IN THE ASSESSMEN T ORDER AT PAGE 12 ARE; IN THE LIGHT OF THE ABOVE FA CTS AND UNAMBIGUOUS POSITION OF LAW, IT IS CLEAR THAT THE L ANDS UNDER CONSIDERATION ARE NOT AGRICULTURAL IN NATURE EVEN THOUGH THEY FALL UNDER THE CRITERIA LAID DOWN UNDER SECTION 2(14)(III) OF THE ACT. THEREFORE, THE PROFI T ON SALE OF 8 LAND CANNOT BE CLAIMED AS EXEMPT. THE AO FOLLOWED THE GUIDELINES AND GENERAL TESTS LAID DOWN, BY THE HON' BLE SUPREME COURT, IN THE CASE OF SARIFABIBI MOHMED IBR AHIM & OTHERS V CIT (SUPRA) TO ARRIVE AT SUCH FINDINGS. THE AO OBSERVED THAT THE ASSESSEE IS A PRACTICING CHARTERE D ACCOUNTANT AND EFFECTED PURCHASE AND SALE OF NUMBER OF PROPERTIES. AS NOTICED BY THE AO, THE LAND WAS ACT UALLY NOT UNDER CULTIVATION IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE AO, FURTHER, OBSERVED THAT THE LAND WAS NOT UNDER CULTIVATION, EVEN BEFORE THE PERIOD U NDER CONSIDERATION, AS IS CLEAR FROM THE JAMABANDI OF 19 98-99, WHEREIN IT IS SHOWN THAT NO LAGAN WAS PAID NOR ANY REVENUE WAS PAID ON THIS LAND. THE ASSESSEE HAS NO T GIVEN THESE LANDS ON LEASE FOR AGRICULTURAL PURPOSE , AS IS EVIDENT FROM THE FACT THAT ASSESSEE HAD NOT SHOWN A NY INCOME FROM AGRICULTURE. THE AO, FURTHER, OBSERVED THAT ON THE RELEVANT DATE OF SALE, LAND WAS NOT USED FOR AGRICULTURE PURPOSE, BUT WAS LYING VACANT, WITHOUT ANY AGRICULTURAL ACTIVITY CARRIED THEREON. THUS, AS PE R AO, THERE WAS NO AGRICULTURAL ACTIVITY, ON THE SAID LAN D. THE AO, FURTHER, POINTED OUT THAT THE LAND WAS SOLD TO INDUSTRIAL HOUSES, FOR NON-AGRICULTURE PURPOSE, HEN CE IT DOES NOT SATISFY THE GENERAL TESTS LAID DOWN IN THE CASE OF SARIFABIBI MOHMED IBRAHIM & OTHERS V CIT (SUPRA). THE AO, FURTHER, HIGHLIGHTED THAT THESE LANDS WERE PURC HASED AT A VERY LOW COST AND SOLD FOR HUGE PROFITS, TO IN DUSTRIAL HOUSES. THE AO WAS OF THE VIEW THAT NO AGRICULTURI ST WOULD PURCHASE THE LAND FOR AGRICULTURAL PURPOSES, AT THE PRICE AT WHICH THE LAND WAS SOLD BY THE ASSESSEE. I T WAS, FURTHER, OBSERVED BY THE AO THAT THOUGH THE LAND WA S ENTERED IN THE LAND REVENUE RECORD, BUT THE SAME WA S NOT USED FOR AGRICULTURAL PURPOSE. THE LAND HAD NOT BE EN PLOUGHED, NEITHER THE OWNER INTENDED TO USE IT FOR AGRICULTURAL PURPOSE. THE AO, FURTHER, RECORDED TH AT THE LANDS ARE SITUATED IN AN AREA, THE SURROUNDINGS OF WHICH ARE INDUSTRIALIZED. THE SURROUNDING LANDS ENJOY EXEMPTION BY THE STATE AND CENTRAL GOVERNMENT FOR 9 SETTING UP OF INDUSTRIAL UNITS. THE PHYSICAL CHARACTERISTICS AND SURROUNDING AREAS AND THE USE O F THE LANDS IN ADJOINING AREAS INDICATE THAT THE SALE OF LAND IS NOT FOR THE PURPOSE OF AGRICULTURE BUT FOR THE BIG INDUSTRIAL HOUSES TO SET UP THEIR UNITS IN THE AREA . ON THESE OBSERVATIONS, AO CONCLUDED THAT THE LAND IN QUESTION IS NOT AGRICULTURAL LAND. 7(I). THE AO, FURTHER, HELD THAT HAVING REGARD TO THE NATURE AND QUALITY OF THE ASSET PURCHASED AND SOLD, ALONGWITH THE FREQUENCY OF SUCH TRANSACTIONS, IT IS EVIDENT THAT THESE TRANSACTIONS ARE ADVENTURE IN NATURE OF TRADE. THE ASSESSEE HAD PURCHASED THE LAND IN BIGHAS AND S OLD THE SAME IN BIGHAS. AO REFERRED TO THE TEST OF INT ENTION IN THE CASE OF THE ASSESSEE APPELLANT AND HELD THAT TH ERE IS A STRONG PRESUMPTION THAT THE TRANSACTION IS ADVENT URE IN THE NATURE OF TRADE. AO ALSO REFERRED TO THE DECIS ION OF THE HON'BLE SUPREME COURT IN THE CASE OF KARAM CHAN D THAPAR & BROTHERS PVT.LTD. V CIT (1971) 83 ITR 899, WHEREIN IT WAS HELD THAT THE ASSESSEE HAD SHOWN CER TAIN ASSETS AS INVESTMENT IN ITS BOOKS OF ACCOUNT, IS NOT IN ITSELF A CONCLUSIVE CIRCUMSTANCE BUT RELEVANT CIRCUMSTANCE. THE PRESENT APPELLANT HAS SHOWN THE IMPUGNED LAND AS FIXED ASSET IN THE BOOKS OF ACCOUNT AND THE BALANCE-SHEET. LD. CIT(A), UPHELD THE FINDINGS OF THE AO BY MAKING REFERENCE TO THE SAME CASE LAWS AND THE DEFINITION OF THE CAPITAL ASSET, AS CO NTAINED U/S 2(14)(III) OF THE ACT. 8. WE HAVE CAREFULLY PERUSED THE FINDINGS OF THE CIT(A), AS CONTAINED IN PARA 6 TO 7.2, FROM PAGES 2 8 TO 36 OF THE APPELLATE ORDER AND FOUND THAT THE LD. CIT(A ) HAS PLACED RELIANCE ON THE FACTORS, WHICH INSPIRED THE AO, TO CONCLUDE THAT THE IMPUGNED LAND IS NOT AGRICULTURAL ONE. LD. CIT(A), HAS REITERATED AND REPEATED THE FINDING S AND OBSERVATIONS OF THE AO. HOWEVER, RELEVANT FIND INGS OF THE CIT(A) ARE REPRODUCED HEREUNDER : 10 6. I HAVE CAREFULLY CONSIDERED ARGUMENTS OF TH E COUNSEL FOR THE APPELLANT AND THE OBSERVATIONS AND FINDINGS OF THE AO IN THE ASSESSMENT ORDER. THE APP ELLANT HAS EARNED PROFIT OF RS.82,01,796/- ON SALE OF LAND IN H.P. THE APPELLANT HAS CLAIMED THE PROFIT EXEMPT ON THE GROUND THAT THE LAND IS NOT A CAPITAL ASSET AS PER SECTION 2(14}(III) OF THE INCOME TAX ACT, 1961 FOR THE REAS ON THAT IT WAS AGRICULTURAL LAND AND WAS SITUATED IN RURAL AREAS. THE AO DISCUSSED THE GENERAL PRINCIPLES AND TESTS L AID DOWN BY VARIOUS COURTS TO ASCERTAIN WHETHER THE LAN D SOLD IS AGRICULTURAL LAND AND FALLS IN THE SCOPE OF SECT ION 2(14)(III). THE AO DISCUSSED THE PRINCIPLES LAID DO WN IN THE FOLLOWING JUDICIAL DECISIONS:- (I) SARIFABIBI MOHMED IBRAHIM AND OTHERS VERSUS CIT 204 ITR 631 (SC) (II) BEGUMPET PALACE CASE 105 ITR 133 (SC) (III) CIT V. SIDDHARTH J. DESAI 139 ITR 628 (SC) (IV) THE FULL BENCH OF ANDHRA PRADESH HIGH COURT 72 ITR 552 (V) CIT V. V. A. TRIVEDI 172 ITR 95 (BOM.) AFTER DISCUSSING THE GIST OF THE ABOVE DECISIONS AN D THE PRINCIPLES LAID DOWN FOR DETERMINING WHETHER THE LA ND IS AGRICULTURAL LAND, THE AO OBSERVED THAT THE LAND WA S ACTUALLY NOT UNDER CULTIVATION IN THE ASSESSMENT YE AR UNDER CONSIDERATION AS ADMITTED BY THE ASSESSEE IN HIS REPLY DATED 12/09/2007. THE AO FURTHER HELD THAT TH E LAND WAS NOT UNDER CULTIVATION EVEN BEFORE THE A.Y. UNDE R CULTIVATION WHICH IS CLEAR FROM THE JAMABANDI OF 19 98-99 AS PER WHICH NEITHER ANY LAGAN WAS PAID NOR ANY REV ENUE WAS PAID ON [HIS LAND. THE ASSESSEE HAD BECOME THE OWNER OF THESE LANDS JUST A FEW MONTHS BEFORE THEY WERE SOLD. THE ASSESSEE BEING A PRACTICING CHARTERED ACCOUNTANT HAD NO PRACTICAL EXPERIENCE OF AGRICULTU RE. THE AO OBSERVED THAT THE ASSESSEE HAD NOT GIVEN THE SE LANDS ON LEASE FOR AGRICULTURE WHICH HAS BEEN ADMIT TED BY HIM. THE AO OBSERVED THAT THE ASSESSEE HAS NOT SHOW N ANY INCOME FROM AGRICULTURE IN HIS RETURN OF INCOME. TH E AC CONCLUDED THAT THE LAND ON THE RELEVANT DATE OF SAL E WAS NOT USED FOR AGRICULTURAL PURPOSES BUT WAS LYING VA CANT WITHOUT ANY AGRICULTURAL ACTIVITY ON IT. THE AC OBS ERVED 11 THAT THE LANDS WERE SOLD BY THE ASSESSEE TO INDUSTR IAL HOUSES WHO HAVE PURCHASED THE LAND TO SET UP PRODUC TION UNITS ON IT AND THUS THE SALE WAS TO NON-AGRICULTUR ISTS FOR NON-AGRICULTURAL USE. THE AO HAS HELD THAT THE ASSE SSEE PURCHASED THE LANDS AT A VERY LOW COST FROM MARGINA L FARMERS AND CONSOLIDATED THEM INTO LARGE CHUNKS TO SELL THEM TO BIG INDUSTRIAL HOUSES FOR HUGE PROFIT. THE AO HAS GIVEN THE DETAILS OF PURCHASE AND SALE OF LAND TO D RIVE HOME THE POINT. THE AO CONCLUDED THAT NO AGRICULTUR IST WOULD PURCHASE THE LAND FOR AGRICULTURAL PURPOSES A T THE PRICE AT WHICH THE LAND WAS SOLD BY THE ASSESSEE AN D ONLY INDUSTRIAL HOUSES CAN PURCHASE IT AT SUCH A HIGH PR ICE. THE ASSESSEE HAS SOLD THE LAND BECAUSE OF ITS COMME RCIAL VALUE AND NOT SOLD IT VALUING IT AS PROPERTY YIELDI NG AGRICULTURAL PRODUCE. THE AO HELD THAT THE LAND THO UGH ENTERED IN THE REVENUE RECORD HAS NEVER BEEN ACTUAL LY USED FOR AGRICULTURAL PURPOSES. THE OWNER NEVER INT ENDED TO USE IT FOR AGRICULTURAL PURPOSES. THE AC FINALLY HELD THAT THE LANDS ARE SITUATED IN AN AREA, THE SURROUN DINGS OF WHICH ARE HIGHLY INDUSTRIALIZED. THE PHYSICAL CHARACTERISTICS AND THE SURROUNDING AREAS AND THE U SE OF LANDS IN THE ADJOINING AREAS INDICATE THAT THE SALE OF LAND IS NOT FOR THE PURPOSE OF AGRICULTURE BUT FOR THE B IG INDUSTRIAL HOUSES TO SET UP THEIR UNITS IN THE AREA . THE AO CONCLUDED THAT THE LANDS UNDER CONSIDERATION ARE NO T AGRICULTURAL IN NATURE EVEN THOUGH THEY FALL UNDER THE CRITERIA LAID DOWN UNDER SECTION 2(14)(III) OF THE ACT. 6.1 THE COUNSEL FOR THE APPELLANT ON THE OTHER HAND HAS ARGUED THAT THE APPELLANT IS A BONAFIDE AGRICULTURI ST AND PURCHASED THE LANDS FOR AGRICULTURAL PURPOSES. A PERSON WHO IS NOT FROM H.P. CANNOT PURCHASE LANDS FOR AGRICULTURAL PURPOSES IN H.P. THE LANDS WERE PURCHA SED FROM THE OWNERS WHO WERE CULTIVATING THESE LANDS FO R AGRICULTURAL PURPOSES SINCE MANY YEARS. THE LANDS W ERE SITUATED IN RURAL BACKWARD AREA OF VILLAGE BHAIOLI KALAN 12 (H.P.) WHICH IS BEYOND THE MUNICIPAL LIMITS OF ANY NAGAR PANCHAYAT OR CANTONMENT BOARD. THE SANDS WERE PURCHASED FOR USE OF AGRICULTURAL PURPOSES WITHOUT ANY INTENTION TO SELL FOR WHICH REASON POWER OF ATTORNE Y WAS TAKEN IN THE NAME OF THIRD PERSON SH. HARISH AGGARW AL SO THAT THE LANDS CAN BE REGISTERED IN THE NAME OF ASS ESSEE AS AND WHEN REQUIRED. THE LANDS WERE PERMANENTLY US ED FOR AGRICULTURAL PURPOSES AT ME TIME OF PURCHASE AN D ALSO DURING THE HOLDING BY THE ASSESSEE AND CLASSIFIED A S AGRICULTURAL LAND BEING USED FOR AGRICULTURAL PURPO SES, IN THE REVENUE RECORDS. THE LANDS WERE SHOWN AS FIXED ASSETS IN THE RESPECTIVE BALANCE SHEETS AND NOT AS STOCK I N TRADE, HENCE THE BOOK KEEPING RECORDS ALSO SUPPORT THE IN TENTION OF THE ASSESSEE. SALE OF SOME OF THESE LANDS WAS MA DE TO BUY OTHER AGRICULTURAL LANDS SO AS TO IMPROVE THE QUALITY OF THE HOLDING AND FOR CONSOLIDATION SO THAT AGRICU LTURAL ACTIVITIES CAN BE DONE SMOOTHLY IN FUTURE. THE ASSE SSEE AS ON DATE HAS CONSOLIDATED AGRICULTURAL LAND MEASURIN G 90.12 BIGHAS AND HAS NET AGRICULTURAL INCOME OF RS.42,000/- WHICH WAS DECLARED IN THE A.Y. 2007-08. AT THE TIME OF SALE THE CHARACTER OF THE LANDS WAS AGRICULTURAL AND EVEN TODAY SOME LANDS ON WHICH FACTORIES HAVE NOT BEEN ESTABLISHED ARE CLASSIFIED AS AGRICULTURAL LANDS IN REVENUE RECORDS. THE COUNSEL FURTHER ARGUED THAT THE AC CALLED INFOR MATION FROM THE REVENUE AUTHORITIES BUT NO REFERENCE OF TH E SAME HAS BEEN MADE IN THE ASSESSMENT ORDER. FROM THE CON TENTS OF THE REPORT ISSUED BY REVENUE AUTHORITIES THE FAC T THAT THE RELEVANT LANDS WERE AGRICULTURE LANDS WITH IN T HE MEANING OF SECTION 2(14)(III) OF INCOME TAX ACT, 19 61 ARE FULLY JUSTIFIED. THE COUNSEL FURTHER ARGUED THAT TH E AO HAS RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SARIFABIBI MOHMED IBRAHIM V. CIT (1 993) 204 ITR 631 WHOSE FACTS ARC DIFFERENT FROM THE APPE LLANT'S 13 CASE BECAUSE THE LAND IN THAT CASE WAS WITHIN M UNICIPAL LIMITS, NOT CULTIVATED FOR 4 YEARS PRIOR TO SALE AND ALSO THE OWNERS WERE NOT BONAFIDE AGRICULTURISTS . SIMILARLY THE FACTS IN BEGUMPET PALACE CASE (1976) 105 ITR 133 ARE ALSO DIFFERENT FROM THE ASSESSEE'S CASE BECAUSE I N THAT CASE THE LAND WAS WITHIN THE MUNICIPAL LIMITS OF HYDERABAD AND HAD BUILDINGS ENCLOSED WITH COMPOUND WALLS AND WAS NOT PLOUGHED OR TILLED. THE COUNSEL RELIED ON THE DECIS ION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF M.S. SRINI VASA NAICKER AND OTHERS V. INCOME TAX OFFICER (2007) 292 ITR 481 IN WHICH IT WAS HELD THAT CHARACTER OF THE LAND AT THE TIME OF SALE WAS RELEVANT. IF TILL THE DATE OF SALE, AGRICULTURAL OPERATIONS W ERE CARRIED OUT ON THE LAND AND LANDS WERE REGISTERED AS AGRICULTURAL LAND IN REVENUE RECORDS IT WAS NOT RELEVANT THAT PURCHASER WAS GOIN G TO USE THE LAND FOR NON-AGRICULTURAL PURPOSES. IN THE REJOINDER TO THE REMAND REPORT' THE COUNSEL ARGUED THAT AS PER THE REPORT OF THE REVENUE AUTHORITIES AGRICU LTURAL OPERATIONS HAD BEEN CARRIED OUT REGULARLY ON THESE LANDS SINCE LAST MANY YEARS AND THE PRODUCE FROM THE LAND WAS CONSUMED BY THE A SSESSEE'S FAMILY AND WAS ALSO DISTRIBUTED AMONGST THE RELATIV ES AND THE PERSONS ATTENDING TO THE AGRICULTURAL OPERATIONS, I T WAS EXPLAINED THAT MAIZE WAS PRODUCED FROM THE AGRICULTURAL LAND WHICH WAS CONSUMED BY THE FAMILY AND WAS ALSO DISTRIBUTED AMO NGST THE RELATIVES AND THE PERSONS ATTENDING TO THE AGRICULT URAL OPERATIONS. THE COUNSEL ARGUED THAT THE LAND WAS CLASSIFIED AS CHANGAR ABAL BARANI WHICH DO NOT REQUIRE IRRIGATION AND ARE CULT IVABLE LAND AND DO NOT REQUIRE ANY ELECTRICAL OR WATER CONNECTION F OR CULTIVATION. THE COUNSEL ARGUED THAT THE PATWARI IN HIS REPORT D ATED 03.11.2007 HAS STATED THAT THE LAGAN AND REVENUE TA XES HAD REGULARLY BEEN PAID. THE COUNSEL ARGUED THAT THE ASSESSEE HELD THESE AGRICULTURAL LANDS FOR AN AVERAGE PERIOD OF M ORE THAN A YEAR. THEREFORE, THE A.O. HAS ERRED IN HER JUDGMENT AND H AS IGNORED A VITAL FACT THAT THE AGRICULTURAL LANDS WERE ALWAYS CLASSIFIED AS FIXED ASSETS. THE LANDS WERE NOT PUT TO NON AGRICULTURAL USE. THE ASSESSEE DID NOT PURCHASE THESE LANDS AT A LOW COST FROM MAR GINAL FARMERS 14 AND CONSOLIDATED INTO LARGE CHUNKS TO SELL THEM BUT TO CONSOLIDATE INTO A BIGGER PIECE OF LAND AS ANY AGRICULTURIST WO ULD HAVE DONE. THE SURROUNDINGS OF THE LAND WERE SUCH AS TO INDICA TE THAT THE LAND WAS AGRICULTURAL. 6.2 ON CAREFUL CONSIDERATION OF FACTS AND SUBMIS SIONS 1 FIND THAT THE AO HAS RIGHTLY HELD THAT THE LANDS SO LD BY THE APPELLANT ARE NOT AGRICULTURAL LANDS WITHIN THE MEA NING OF SECTION 2(14)(III) OF THE I.T. ACT. THE HON'BLE SUP REME COURT AND VARIOUS OTHER COURTS HAVE LAID DOWN GENER AL PRINCIPLES FOR DECIDING WHETHER THE LAND IS AGRICUL TURAL OR NOT? THE HON'BLE SUPREME COURT IN THE CASE OF SARIF ABIBI MOHMED IBRAHIM AND OTHERS VERSUS CIT(204 ITR 631) H AS OBSERVED AS UNDER:- ' WHETHER A LAND IS AN AGRICULTURAL LAND OR NOT IS ESSENTIALLY A QUESTION OF FACT. SEVERAL TESTS HAVE BEEN EVOLVED IN THE DECISIONS OF THIS COURT AND THE HIGH COURTS, 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 O F THAT CASE. THERE MAY BE FACTORS BOTH FOR AND AGAINS T A PARTICULAR POINT OF VIEW. THE COURT HAS TO ANSWER T HE QUESTION ON CONSIDERATION OF ALL OF THEM BY A PROCE SS OF EVALUATION. THE INFERENCE HAS TO BE DRAWN ON A CUMULATIVE CONSIDERATION OF ALL THE RELEVANT FACTS. IN VIEW OF THE HON'BLE SUPREME COURT OBSERVATIONS WHETHER THE LAND IS AGRICULTURAL DEPENDS ON THE FAC TS OF EACH CASE. IN THE PRESENT CASE THE APPELLANT IS A CHARTERED ACCOUNTANT AND NOT AN AGRICULTURIST. HE PURCHASED LANDS IN HIMACHAL PRADESH FROM NOVEMBER, 2003 ONWARDS AND SOLD THE SAME WITHIN A SHORT INTERVAL OF TIME TO INDUSTRIAL HOUSES. THE DETAILS OF THE SALES MADE BY THE APPELLANT ARE MENTIONED ON PAGES 7 & 8 (SUPRA). IT IS COMMON KNOWLEDGE THAT THE PRICES OF 15 THE REAL ESTATE STARTED SHOOTING UP IN AND AROUND CHANDIGARH FROM 2003 ONWARDS TILL 2007 AND THE PRICES OF REAL ESTATE PROPERTIES INCREASED BY MORE THAN FIVE TIMES DURING A PERIOD OF 2 TO 3 YEARS. TH E APPELLANT BEING A CHARTERED ACCOUNTANT PURCHASED LANDS IN HIMACHAL PRADESH NEAR NALAGARH WHICH IS AN INDUSTRIAL TOWN OF HIMACHAL PRADESH AND ENJOYING TA X CONCESSIONS. NEW INDUSTRIES ARE COMING U&, NEAR THE EXISTING INDUSTRIES TO AVAIL THE TAX CONCESSIONS. T HE INTENTION OF THE APPELLANT IN PURCHASING THE LANDS IS VERY CLEAR THAT HE HAD NO INTENTION OF CARRYING OUT AGRICULTURAL ACTIVITIES BUT HE WANTED TO EARN PROFI T ON SALE OF LANDS SINCE THE REAL ESTATE PRICES WERE MOVING UP. THE AO HAS CLEARLY BROUGHT ON RECORD THE FACT THAT THE LANDS WERE NOT UNDER CULTIVATION. THE CONTENTION OF THE A PPELLANT THAT MAZE WAS GROWN AND USED FOR SELF CONSUMPTION I S A MADE UP STORY. NO AGRICULTURAL INCOME HAS BEEN SHOWN BY THE APPELLANT FROM THE AGRICULTURAL LAND WHICH HE WAS S UPPOSED TO DO EVEN IF THE PRODUCE WAS USED FOR SELF CONSUMP TION. THE AO HAS CLEARLY BROUGHT ON RECORD THE FACT THE LAND WAS PURCHASED AT LOW PRICES FROM MARGINAL FARMERS AND S OLD WITHIN A SHORT INTERVAL OF TIME CO INDUSTRIAL HOUSE S FOR EARNING HUGE PROFITS. THE LANDS WERE THEREFORE NOT HELD AS AGRICULTURAL LANDS BY THE APPELLANT. THERE IS NO DOUBT THAT THE REVENUE RECORDS SHOW THAT THE LANDS ARE AGRICUL TURAL IN NATURE AND HAVE BEEN CULTIVATED BUT THIS IS ONLY AN EVIDENCE CREATED BY THE APPELLANT SINCE HE IS A CHARTERED AC COUNTANT AND VERY WELL KNOWS THE PROVISIONS OF LAW . THE REVENUE RECORDS HAVE BEEN MAINTAINED BY THE APPELLANT TO CR EATE A DEFENSE THAT THE LANDS SOLD ARE AGRICULTURAL, IN TH E PRESENT CASE, THE FACTS AS THEY ACTUALLY EXIST ARE DIFFEREN T FROM THE ARRANGEMENT MADE BY THE APPELLANT IN THE FORM OF RE VENUE RECORDS AND HENCE IT IS THE SUBSTANCE WHICH HAS TO GOVERN THE FIELD AND NOT THE FORM. IN THE PRESENT CASE, THE SU BSTANCE IS 16 THAT THE APPELLANT PURCHASED AND SOLD LANDS FOR EAR NING PROFIT AND NOT FOR AGRICULTURAL PURPOSES THOUGH IN FORM HE HAS CREATED EVIDENCE IN THE SHAPE OF REVENUE RECORD S TO SHOW THAT THE LANDS ARE AGRICULTURAL. THE CONTENTION OF THE APPELLANT ARE REJECTED. THE AO HAS RIGHTLY HELD THA T THE LANDS SOLD BY THE APPELLANT ARE NOT AGRICULTURAL AND HENC E THE PROFIT EARNED ON THE SALE OF LANDS IS NOT EXEMPT WI THIN THE MEANING OF SECTION 2(14)(III) OF THE I.T. ACT. THE FIRST GROUND OF APPEAL IS REJECTED. 7. THE SECOND GROUND OF APPEAL IS THAT THE AO HAS E RRED IN TREATING THE PROFITS ON SALE OF LANDS AS BUSINESS I NCOME OF THE ASSESSEE AND NET EXEMPT INCOME. THE AO OBSERVED THA T THE COURTS HAVE LAID DOWN VARIOUS TESTS OR FACTORS TO B E TAKEN INTO ACCOUNT IN DETERMINING WHETHER THE ASSESSEE IS INDU LGING IN A BUSINESS ACTIVITY AND THE NATURE OF HIS INCOME IS B USINESS INCOME OR IT IS CAPITAL GAIN INCOME. THE AO EXAMINED THE CASE OF THE APPELLANT IN THE LIGHT OF THE GENERAL P RINCIPLES LAIC-DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF G. VENKATASWAMY NAIDU & COMPANY VERSUS CIT (35 ITR 594 ) WHICH ARE NATURE AND QUANTITY OF THE ASSET PURCHASE D AND RESOLD AND THE REPETITION OF THE TRANSACTION. THE A O MENTIONED THAT THERE IS PRESENCE OF THESE FACTORS I N THE CASE OF THE ASSESSEE AS HE HAS BEEN PURCHASING AND SELLI NG LANDS IN VERY LARGE QUANTITY AND THROUGHOUT THE YEAR AND THE TRANSACTIONS RUN INTO HUNDREDS OF BIGHAS OF LAND PU RCHASED AND SOLD. THERE IS REPETITION OF THE TRANSACTIONS. THE AO MENTIONED THAT THE HON'BLE SUPREME COURT HAS FURTHE R DISCUSSED THE TEST OF INTENTION AND IN CASES WHERE ME PURCHASE HAS BEEN MADE SOLELY AND EXCLUSIVELY WITH THE INTENTION OF RESALE AT A PROFIT AND THE PURCHASER H AS NO INTENTION OF HOLDING THE PROPERTY FOR HIMSELF OR OT HERWISE ENJOYING IT OR USING IT, THE PRESENCE OF SUCH INTEN TION IS A RELEVANT FACTOR AND UNLESS IT IS OFF-SET BY THE PRE SENCE OF OTHER FACTORS, IT WOULD RAISE A STRONG PRESUMPTION THAT THE 17 TRANSACTION IS ADVENTURE IN THE NATURE OF TRADE. TH E AO HELD THAT THE ASSESSEE HAS PURCHASED THE LANDS JUST FEW MONTHS BEFORE THE SALE AT A VERY LOW COST FROM MARGINAL FA NNERS AND CONSOLIDATED INTO LARGE CHUNKS TO SELL IT TO BIG IN DUSTRIAL HOUSES AT HUGE PROFIT. THE ASSESSEE PURCHASED LAND BUT NEVER GOT IT REGISTERED IN HIS NAME. THE ASSESSEE GOT THE POWER OF ATTORNEY FROM THE SELLERS IN THE NAME OF ONE SH HAR ISH AGGARWAL, RESIDENT OF VILLAGE JHARMAJRI, TEHSIL NAL AGARH, DISTRICT, SOLAN. A NEW BUYER WAS FOUND BY THE ASSES SEE IN THE SAME YEAR OF PURCHASE AND THE LAND WAS DIRECTLY REG ISTERED IN THE NAME OF THE BUYER. THIS HAS BEEN ADMITTED BY ME ASSESSEE. THIS SHOWS THAT THE ASSESSEE HAD NO INTEN TION TO HAVE THE OWNERSHIP OF THE ASSET BUT TO DISPOSE IT O FF AT THE EARLIEST. THE AO RELIED ON THE DECISION IN THE CASE OF KARAM CHAND THAPAR AND BROTHERS (P) LTD VS. CIT (1971) 83 ITR 899 IN WHICH IT WAS HELD BY THE SUPREME COURT THAT THE CIRCUMSTANCE THAT THE ASSESSEE HAD SHOWN CERTAIN AS SETS AS INVESTMENT IN ITS BOOKS AS WELL AS ITS BALANCE SHEE T WAS BY ITSELF NOT A CONCLUSIVE CIRCUMSTANCE, THOUGH IT WAS A RELEVANT CIRCUMSTANCE. THE AO ALSO RELIED ON DECISION OF THE AUTHORITY FOR ADVANCE RULINGS ( AAK ) (288 ITR 641. THE AO CONCLUDED THAT THE ASSESSES PURCHASED THE LANDS WIT H THE INTENTION OF MAKING PROFIT ON THEIR SALE AND THUS IS ENGAGED IN A BUSINESS ACTIVITY. 7.1 THE COUNSEL FOR THE APPELLANT ON THE OTHER HAND FIRSTLY ARGUED THAT THE DECISIONS RELIED UPON BY THE AO IN THE CASES G. VENKATASWANIY NAIDU & COMPANY V. CIT (35 I TR 594), KARAM CHAND THAPAR AND BROTHERS (P) LTD. V. C IT (1971) 83 ITR 899 AND THE DECISION OF THE AUTHORITY FOR ADVANCE RULINGS (AAR) (282 ITR641) ARE NOT APPLICAB LE SINCE THE FACTS ARE DIFFERENT. SECONDLY THE COUNSEL ARGUED THAT THE AGRICULTURAL LANDS PURCHASED DURING THE YE AR 2003- 2004 WERE CLASSIFIED AS THE FIXED ASSETS IN THE BOO KS OF 18 ACCOUNT AS WELL AS IN THE BALANCE SHEET. THEREFORE, THE HOLDING OF THESE LANDS AS FIXED ASSETS AND NOT AS S TOCK IN TRADE SUPPORTS THE CONTENTION OF THE ASSESSEE THAT THESE WERE THE CAPITAL ASSETS AND WERE NOT MEANT FOR TRAD ING PURPOSES. THE AGRICULTURAL LAND WAS PURCHASED IN BI GHAS AND WAS SOLD IN BIGHAS WITHOUT THERE BEING ANY ATTE MPT TO DEVELOP THE LAND AND CUTTING IT INTO PLOTS AND THEN TO SELL IT. NO ATTEMPT WAS MADE TO PROVIDE ANY AMENITIES OR TO DEVELOP ANY COLONY. A NORMAL OPPORTUNITY AROSE IN T HE MARKET FOR SALE OF THESE AGRICULTURAL LANDS TO INCR EASE THE WEALTH. THIRDLY THE COUNSEL ARGUED THAT SALE OF SOM E SMALL PIECES OF LAND WAS MADE TO IMPROVE THE LAND PORTFOL IO AND CONSOLIDATION OF THE SAME INTO BIGGER PIECES OF LAN D SO THAT AGRICULTURAL ACTIVITIES, MAY BE DONE SMOOTHLY. THE COUNSEL HAS RELIED ON SOME CASE LAWS WHICH HAVE BEEN DISCUS SED ASPART OF HIS WRITTEN SUBMISSIONS SUPRA. 7.2 ON CAREFUL CONSIDERATION OF THE ABOVE FACTS AND SUBMISSION, I FIND THAT THE AO HAS RIGHTLY TREATED THE PROFIT ON SALE OF LAND AS BUSINESS INCOME OF THE APPELLANT . THE AO HAS CLEARLY BROUGHT ON RECORD THE FACTS THAT THE AP PELLANT HAS BEEN PURCHASING AND SELLING LANDS IN LARGE QUAN TITY THROUGH OUT OF THE YEAR AND THERE IS REPETITION OF TRANSACTIONS. THE DETAILS OF THE SALE/PURCHASE OF L ANDS MADE BY THE APPELLANT ARE GIVEN ON PAGE 7 & 8 (SUPR A). THESE DETAILS CLEARLY SHOW THAT THE INTENTION OF TH E APPELLANT WAS TO EARN PROFIT ON SALE OF THE LAND. I T IS FURTHER INTERESTING TO NOTE THAT THE APPELLANT DID NOT GET THE SALE DEEDS OF LANDS EXECUTED IN HIS OWN NAME BUT PURCHASED THE LAND ON POWER OF ATTORNEY IN THE NAME OF ONE HARISH AGGARWAL AND SOLD THAT THE LAND BY GETTING THE SALE DEEDS EXECUTED DIRECTLY IN THE NAM E OF PURCHASERS THROUGH THE POWER OF ATTORNEY. THIS ACTI ON OF THE APPELLANT CLEARLY SHOWS THAT HE NEVER HAD INTENTION CO HOLD THE LAND FOR AGRICULTURAL PURPOSE S BUT TO SELL THEM FOR EARNING PROFIT. THE ENTRIES IN THE 19 REVENUE RECORDS ARE NOTHING BUT EVIDENCE CREATED BY THE APPELLANT WHO HAPPENS TO BE A CHARTERED ACCOUNTANT. THE ARGUMENT OF THE COUNSEL THAT THE AGRICULTURAL LANDS PURCHASED DURING THE YEAR 2003- 2004 WERE CLASSIFIED AS THE FIXED ASSETS IN THE BOO KS OF ACCOUNT AS WELL AS IN THE BALANCE SHEET AND THAT TH ESE WERE CLC CAPITAL ASSETS AND WERE NOT MEANT FOR TRADING PURPOSES IS DEVOID OF ANY MERIT AND IS REJECTED. PASSING OF ENTRIES IN THE BOOKS OF ACCOUN T OR THE BALANCE SHEET EAR-NOT DETERMINE THE INTENTION O F THE APPELLANT SINCE IT IS THE SUBSTANCE WHICH HAS T O GOVERN THE FIELD AND NOT THE FORM. FROM THE FACTS AND CIRCUMSTANCES OF THE CASE THE PROFIT MOTIVE AND THE INTENTION OF THE APPELLANT TO EARN PROFIT IS CLEAR. THE AO HAS RIGHTLY TREATED THE PROFIT ON SALE OF LANDS AS BUSINESS INCOME. THE SECOND GROUND OF APPEAL IS ALS O REJECTED. 9. THE ASSESSEE APPELLANT SUBMITTED BEFORE THE CIT( A) THAT THE ASSESSEE IS A PRACTICING C.A. AND BONAFIDE HIMACHALI AGRICULTURIST, SINCE 20.12.2002. DURING T HE FINANCIAL YEAR 2003-04, THE ASSESSEE PURCHASED 82.1 8 BIGHAS RURAL AGRICULTURE LAND IN HIMACHAL PRADESH BEYOND MUNICIPAL LIMITS OR CANTONMENT BOARD. THE L AND WAS PURCHASED WITH THE INTENTION TO DO AGRICULTURE OPERATIONS AND THE SAME WAS SHOWN AS FIXED ASSET, I N THE AUDITED BALANCE SHEET, AS ON 31.3.2004. DURING THE RELEVANT A.Y. 2005-06 (F.Y. 2004-05), THE ASSESSEE SOLD 52.06 BIGHAS OF LAND AND PURCHASED 28.17 BIGHAS OF LAND AND THE LAND WAS SHOWN AS FIXED ASSET, IN THE AUDIT ED BALANCE-SHEET AS ON 31.3.2005. THE ASSESSEE STATED THAT THE PURPOSE OF PURCHASING THE LAND WAS TO CARRY OUT AGRICULTURAL ACTIVITIES, ON A LARGER CHUNK. IT WAS, FURTHER, CONTENDED BY THE ASSESSEE THAT THE AGRICULTURAL LAN DS WERE SITUATED BEYOND MUNICIPAL LIMITS, AT VILLAGE B HATOLI 20 KALAN (HP) AND WERE BEING USED FOR AGRICULTURAL ACTIVITIES, AT THE TIME OF PURCHASE AND SALE, CLASS IFIED IN THE REVENUE RECORDS AS AGRICULTURE LANDS. HENCE, TH E SAID LAND IS NOT CAPITAL ASSET WITHIN THE MEANING OF SEC TION 2(14)(III) OF THE ACT. THE ASSESSEE AT PAGE 23 OF THE PAPER BOOK, FILED IN FORM NO. II, KHASRA GIRDAWARI FROM 2002 TO 2007 IN RESPECT OF `LANDS UNDER THE HEAD MAUJA; BHATOLI KALAN, HADBAST NO. 214, PARGNA DHARAMPUR, THE. BADDI, DISTT. SOLAN, INDICATING FUL L DETAILS OF THE LAND, AREA, NAME OF THE OWNER, KHASR A NUMBER, CROPS GROWN DURING THE PERIOD. A BARE PERUSAL OF SUCH DOCUMENTARY EVIDENCE REVEALS THAT THE LAND WAS UNDER AGRICULTURAL OPERATION FROM 2002 TO 2007. IN VIEW OF THIS, THE OBSERVATIONS OF THE AO, AS CONTAINED IN PARA 7 OF THIS ORDER, ARE FACTU ALLY INCORRECT. THE REVENUE HAS FAILED TO REBUT THE CON TENTS OF DOCUMENTARY EVIDENCE, ADDUCED BY THE APPELLANT. 9 (I) THE ASSESSEE, IN THE RETURN OF INCOME FOR T HE ASSESSMENT YEAR 2005-06, CLAIMED THE PROFIT ON THE SALE OF RURAL AGRICULTURE LAND OF RS.82,01,796/- AS EXEM PT U/S 10(37) OF THE ACT. IT WAS, FURTHER, SUBMITTED BEFO RE THE CIT(A), THAT REQUISITE DOCUMENTS AND EXPLANATIONS W ERE FILED BEFORE THE AO BUT THE AO REJECTED THE SAME WI THOUT ANY BASIS AND TREATED THE SURPLUS, EMANATING FROM T HE SALE OF LANDS, AS BUSINESS PROFIT. 9(II) IT WAS AGAIN REITERATED BY THE APPELLANT TH AT THE LAND IS NOT CAPITAL ASSET, WITHIN THE MEANING OF SE CTION 2(14)(III) OF THE ACT. IT WAS ALSO CONTENDED BEFOR E THE CIT(A) THAT THE GENERAL TESTS OR GUIDELINES LAID DO WN BY THE HON'BLE SUPREME COURT, IN THE CASE OF SARIFABIB I MOHMED IBRAHIM & OTHERS V CIT (SUPRA) ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE, THE FA CTS BEING DIFFERENT AND DISTINGUISHABLE. IN THAT CASE, THE L AND IN QUESTION WAS SITUATED WITHIN THE MUNICIPAL LIMITS O F SURAT AND THE SAME WAS NOT CULTIVATED FOR FOUR YEARS PRIO R TO SALE AND ALSO THE OWNERS WERE NOT BONAFIDE 21 AGRICULTURISTS. THE HON'BLE APEX COURT, AFTER CONS IDERING VARIOUS DECISIONS, LAID DOWN GENERAL GUIDELINES AND TESTS, FOR THE PURPOSE OF DETERMINATION OF THE LAND AS AGRICULTURAL LAND OR OTHERWISE, DEPENDING ON THE FA CTS OF EACH CASE. THE AO ALSO REFERRED TO THE DECISION, I N THE CASE OF BEGUMPET PALACE (SUPRA) WHEREIN THE LAND IN QUESTION WAS SITUATED WITHIN THE MUNICIPAL LIMITS O F HYDERABAD AND HAD BUILDINGS ENCLOSED WITHIN THE COMBINED WALLS AND WAS NOT PLOUGHED OR TILLED. HOW EVER, THE FACTS OF THE PRESENT CASE ARE ENTIRELY DIFFEREN T AND, HENCE, DISTINGUISHABLE FROM THE FACTS OF THE LAND, ON WHICH THE CASE OF BEGUMPET PALACE (SUPRA) WAS DECID ED BY THE HON'BLE SUPREME COURT. THE AO ALSO REFERRED TO THE DECISION OF THE GUJRAT HIGH COURT, IN THE CASE OF CIT V SIDHARATH J.DESAI (SUPRA)AND BOMBAY HIGH COURT, IN THE CASE OF CIT V. V.A.TRIVEDI (SUPRA). IT IS ADDED TH AT THESE CASES WERE MENTIONED AND EXPLAINED BY THE HON'BLE SUPREME COURT, IN THE CASE OF SARIFABIBI MOHMED IBR AHIM & OTHERS V CIT (SUPRA). THE HON'BLE SUPREME COURT OBSERVED THAT; WHETHER A LAND IS AGRICULTURAL LAND OR NOT, IS ESSENTIALLY A QUESTION OF FACT. SEVERAL DECISIONS HAVE BEEN EVOLVED IN THE DECISIONS OF THI S COURT AND HIGH COURTS, 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 THE PARTICULAR POINT OF VIEW. THE COURT HAS TO ANSWER THE QUESTION ON CONSIDERING OF ALL OF THEM BY A PROCESS OF VALUATIO N. THE INFERENCE HAS TO BE DRAWN ON A CUMULATIVE CONSIDERATION OF ALL THE RELEVANT FACTS. 10. IT WAS CONTENDED BY THE ASSESSEE THAT THE APPEL LANT IS A BONAFIDE HIMACHALI AGRICULTURIST AND PURCHASED LAND FOR AGRICULTURAL PURPOSES. A PERSON WHO IS NOT A HIMACHALI, CANNOT PURCHASE AGRICULTURAL LAND, IN TH E STATE OF HIMACHAL. THE LANDS WERE PURCHASED FROM THE OWN ERS, WHO THEMSELVES WERE CULTIVATING THESE LANDS, SINCE MANY 22 YEARS. THE LANDS IN QUESTION WERE SITUATED IN RURA L BACKWARD AREA OF VILLAGE BHATOLI KALAN, WHICH FALLS BEYOND THE MUNICIPAL LIMITS OF ANY NAGAR PANCHAYAT OR CANTONMENT BOARD. THE LANDS WERE PURCHASED FOR USE OF AGRICULTURAL PURPOSE WITHOUT ANY INTENTION TO SELL IT. IT WAS, FURTHER, CONTENDED THAT THE LANDS WERE PERMANE NTLY USED FOR AGRICULTURAL PURPOSES AT THE TIME OF PURCH ASE AND ALSO DURING THE HOLDING OF THE SAME AND SALE TH EREOF BY THE ASSESSEE. THE SAID LAND WAS CLASSIFIED AS AGRICULTURAL LAND, BEING USED FOR AGRICULTURAL PURP OSES, IN THE REVENUE RECORDS. THE LAND WAS SHOWN AS FIXED A SSET IN BOOKS OF ACCOUNT OF THE ASSESSEE. AT THE TIME O F SALE, CHARACTER OF THE LAND WAS AGRICULTURAL ONE AND EVEN TODAY, SOME LANDS ON WHICH FACTORIES HAVE NOT BEEN ESTABLISHED, ARE CLASSIFIED AS AGRICULTURAL LAND UN DER REVENUE RECORDS. THE ASSESSEE APPELLANT, FURTHER, CONTENDED THAT THE AO CALLED FOR INFORMATION, FROM THE REVENUE AUTHORITIES, NALAGRH, BUT NO REFERENCE OF THE SAME HAS BEEN MADE IN THE ASSESSMENT ORDER PASSED BY HER. THE REPORT SUBMITTED TO THE AO HAD BEEN SECURED BY THE ASSESSEE UNDER RTI ACT. WE HAVE ALREADY REPRODUCED THE SAID REPORT IN THE FOREGOING PARAGRAPHS. THE SAID REPORT DEMOLISHES THE FINDINGS OF THE AO. THE ASSESSEE REFERRED TO THE DECISION OF T HE MADRAS HIGH COURT IN THE CASE OF M.S.SRINIVASA NAIC KER V ITO (2007) 292 ITR 481, IN WHICH THE HON'BLE HIGH COURT HELD THAT CHARACTER OF LAND, AT THE TIME OF SALE IS RELEVANT. TILL THE DATE OF SALE, AGRICULTURAL OPERATIONS WERE CARRIED OUT, ON THE LANDS AND LANDS WERE REGISTERED AS AGRICULTURAL LAND IN THE REVENUE RECO RDS, IT WAS NOT RELEVANT THAT PURCHASER WAS GOING TO USE TH E LAND FOR NON-AGRICULTURAL PURPOSES. IT WAS STRESSE D THAT THE AO, IN THE PRESENT CASE OVER-EMPHASIZED ON THE POTENTIAL USE OF THE LAND IN QUESTION BY THE PURCHA SER, AFTER ITS SALE. IT IS THE NATURE AND CHARACTER OF THE LAND, ON THE DATE OF PURCHASE AND SALE, WHICH IS RELEVANT AND NOT THE POTENTIAL USE BY THE PURCHASER OF THE SAID LAND, 23 FOR THE PURPOSE OF DETERMINING WHETHER THE LAND IS AGRICULTURAL ONE OR OTHERWISE. THE ASSESSEE HAD DISTINGUISHED ALL THE CASE LAWS RELIED UPON BY THE AO AND STRESSED THAT THE DECISION, IN THE CASE OF CIT V SI DHARATH J.DESAI, RELIED UPON BY THE AO (SUPRA) WHEREIN CERT AIN CASES HAVE BEEN MENTIONED BY THE HON'BLE GUJRAT HIG H COURT, HELP THE CASE OF THE ASSESSEE AND NOT THAT O F THE REVENUE. IT WAS, FURTHER, ARGUED BY THE ASSESSEE B EFORE THE CIT(A) THAT AGRICULTURAL LAND WAS PURCHASED IN BIGHAS AND SOLD IN BIGHAS, WITHOUT THERE BEING ANY ATTEMPT TO DEVELOP THE LAND AND CUTTING IT INTO PLOTS AND TO S ELL THE SAME. NO AMENITIES WERE PROVIDED FOR THE PURPOSE O F DEVELOPING ANY COLONY ON SUCH LANDS. THEREFORE, GE NERAL TESTS OR GUIDELINES LAID DOWN, IN THE DECISION OF T HE HON'BLE SUPREME COURT, IN THE CASE OF SARIFABIBI MO HMED IBRAHIM & OTHERS V CIT (SUPRA) CLEARLY DEMONSTRATE THAT THE LAND OF THE PRESENT APPELLANT IS AGRICULTURAL L AND. THE AO, AS WELL AS THE CIT(A), PLACED RELIANCE ON T HE DECISION OF THE HON'BLE SUPREME, COURT IN THE CASE OF SARIFABIBI MOHMED IBRAHIM & OTHERS V CIT (SUPRA) TO SUPPORT THEIR FINDINGS IN THE MATTER. HOWEVER, THE FACTS OF THE PRESENT CASE DO NOT HAVE THE SEMBLANCE, OF RESEMBLANCE TO THE FACTS OF THE CASE, RELIED UPON B Y THE REVENUE AUTHORITIES. THE HON'BLE SUPREME COURT , IN THE CASE OF SARIFABIBI MOHMED IBRAHIM & OTHERS V CIT (SUPRA), WAS DEALING WITH A CASE WHERE THE APPELLANTS WERE CO-OWNERS OF A PLOT OF LAND, INHERITED FROM AN ANCESTRAL, THROUGH THEIR FATHER. ON MARCH 15, 1967, THEY AGREED TO SELL THE LAND, TO A HOUSING COOPERATION SOCIETY AND, TO ENABLE THEM T O COMPLETE THE TRANSACTIONS, THEY APPLIED IN JUNE, 1968 AND MARCH, 1969 FOR PERMISSION TO TRANSFER THE LAND FOR NON-AGRICULTURAL PURPOSES AND THE PERMISSION WAS GRANTED IN APRIL,1969. THE APPELLANT EXECUTED A NUMBER OF SALE DEEDS IN MAY,1969 AND THE PURCHASING SOCIETY APPLIED FOR CONVERSION OF THE LAND TO NON-AGRICULTURE PURPOSE V IZ 24 CONSTRUCTION OF BUILDING. THE QUESTION BEFORE THE HON'BLE SUPREME COURT WAS, WHETHER THE PROFIT FROM THE SALE OF THE LAND WAS ASSESSABLE TO CAPITAL GAIN S TAX. THE APPELLANTS WERE CO-OWNERS OF THE PLOT OF LAND, SITUATED WITHIN THE REVENUE LIMITS OF NAWAN GAON VILLAGE. IT IS SITUATED WITHIN THE MUNICIPAL LIMITS OF SURAT MUNICIPALITY AND IS SITUATED AT A DISTANCE OF 1 K.M. FROM SURAT RAILWAY STATION. ON MARCH 28, 1958, A PORTION OF THE SAID PLOT WAS CONVERTED INTO NON-AGRICULTURAL PURPOSES, AFTER OBTAINING REQUISITE PERMISSION U/S 63 OF THE BOMBAY LAND REVENUE CODE. A CHAWL WAS BUILT THEREON. THE SAID PLOT WAS SOLD TO A NON-AGRICULTURIST FOR NON AGRICULTURAL PURPOSES. IT IS SOLD TO A COOPERATIVE HOUSING SOCIETY FOR CONSTRUCTION OF HOUSES AND BUILDINGS. THE SAID LAND WAS SOLD ON PER SQUARE YARD BASIS AT RS.23/- PER SQ.YD., ON MAY 30,1969. NO AGRICULTURE OPERATIONS HAD BEEN CARRIED ON FOR THE LAST FOUR YEARS. AN APPLICATION FOR PERMISSION TO SELL THE LAND TO A HOUSING SOCIETY U/S 63 OF LAND REVENUE CODE WAS MADE IN AUGUST, 1968, SOME 9 MONTHS BEFORE THE ACTUAL SALE EFFECTED IN MAY, 1969 AND IT WAS GRANTED ON FEB. 24, 1969, ABOUT A MONTH PRIOR TO THE ACTUAL SALE. APPLICATION TO CONVERT T HE LAND UNDER TRANSACTION TO NON-AGRICULTURAL USER, WAS NOT MADE BEFORE THE SALE DEED WAS EXECUTED ON MAY 30, 1969. IT WAS SUBSEQUENTLY MADE BY THE PURCHASER HOUSING SOCIETY MUCH LATER ( BUT THEN, PERMISSION COULD HAVE BEEN APPLIED FOR, IF SO DESIR ED AND COULD HAVE BEEN REFUSED ARBITRARILY; IT IS COMMON EXPERIENCE THAT IT IS GRANTED ALMOST AS A MATTER OF COURSE ). IN FACT, IT IS ON RECORD THAT THE PURCHASER SOCIETY COMMENCED ACTUAL CONSTRUCTION ON JUNE 2, 1969, I.E. WITHIN 3 DAYS OF THE EXECUTION O F THE SALE DEED IN ITS FAVOUR BY THE ASSESSEE, IN ANTICIPATION OF THE PERMISSION. NO AGRICULTURAL OPERATIONS WERE CARRIED ON SINCE 1964-65 TILL THE 25 SALE IN 1969. IT IS IN SUCH FACTUAL MATRIX, THE HON'BLE APEX COURT HELD THAT SUCH A PIECE OF LAND CANNOT BE TREATED AS NON-AGRICULTURAL LAND. 11. IT IS SIGNIFICANT TO RECORD HERE THAT IN THE PR ESENT CASE, THE TEHSILDAR, NALAGARH, DISTT. SOLAN (HP) VI DE LETTER DATED 7.1.2008, ADDRESSED TO ACIT, PANCHKULA CIRCLE , PANCHKULA, FURNISHED CERTAIN VITAL AND MATERIAL DET AILS, IN RESPECT OF LANDS IN QUESTION. THE AO CALLED FOR SUCH INFORMATION U/S 133(1) OF THE ACT, IN THE CASE OF T HE ASSESSEE APPELLANT, FOR THE PURPOSE OF SUPPORTING H ER FINDINGS WHILE FRAMING THE IMPUGNED ASSESSMENTS. HOWEVER, ON RECEIPT OF SUCH INFORMATION, THE AO DID NOT DISCUSS SUCH INFORMATION AND NO RELIANCE WAS PLACED ON SUCH INFORMATION EMANATING FROM THE OFFICE OF TEHSI LDAR, WHILE PASSING THE ASSESSMENT ORDER, FOR THE REASONS BEST KNOWN TO HER. THE ASSESSEE CALLED FOR SUCH INFORMA TION UNDER RTI ACT. THE CONTENTS OF THE SAID LETTER HAV E BEEN REPRODUCED ABOVE. A BARE PERUSAL OF THE LETTER IN QUESTION REVEALS THAT THE TEHSILDAR SUBMITTED A COP Y OF JAMABANDI OF LAND BEARING KHASRA NO. 1341/3, 1341/2 1338 1339 1336 1337 1335 1319 1345/1, 1347/1 IN VILLAGE BHATOLI KALAN, TO THE ACIT, PANCH KULA, IT IS CATEGORICALLY MENTIONED IN THE SAID LETTER TH AT THE ABOVE LAND DOES NOT FALL UNDER THE MUNICIPAL CORPOR ATION, NAC, NAGAR PANCHAYAT, BADDI, TO ABOVE KHASRA LAND I S APPROXIMATELY 10 KM. THE DISTANCE OF THE LAND IS M ORE THAN 8 KM. THE LAND IS AWAY FROM NAGAR PANCHAYAT. THE SAID LAND WAS USED FOR AGRICULTURAL PURPOSES BE FORE SELLING. IT IS FURTHER INDICATED IN THE LETTER THAT THE HIMACHALI AGRICULTURIST DOES NOT REQUIRE ANY PERMIS SION FROM GOVERNMENT WHILE BUYING OR SELLING THE LAND, B UT IF THE PURCHASER IS NON-AGRICULTURIST, THEN IT IS NECE SSARY THAT HE HAS TO OBTAIN PERMISSION FROM GOVERNMENT U/ S 118 OF HIMACHAL PRADESH TENANCY AND LAND REFORMS RULES, 1972. THE ABOVE SAID LAND WAS AGRICULTURAL LAND AT THE TIME OF PURCHASE AND SALE. ON RELEVANT DATE , THE ABOVE LAND WAS AGRICULTURAL LAND AND THE PURCHASER HAS 26 PURCHASED THIS LAND FOR SETTING UP INDUSTRIAL UNIT AND WHEN THE INDUSTRY IS SET UP ON KHASRA NUMBER, THEN THE LAND BECOMES NON-AGRICULTURAL LAND. THE ABOVESAID LAND WAS REGULARLY USED FOR AGRICULTURAL PURPOSES. THE ABOVE LAND FALLS UNDER RURAL AREAS AND AT THAT TIME, WAS NOT DEVELOPED AND ALL LANDS SURROUNDING THIS LAND, WERE USED FOR AGRICULTURAL PURPOSES. THE ABOVE LAND HAS NOT DEVELOPED INTO ANY PLOTS OR ROADS. THE PERMISSION FOR PURCHASE OF LAND IS OBTAINED BY NON-AGRICULTURIST PURCHASER. LAND WAS SOLD ACCORDING TO THE BIGHAS O R BISWAS AND NOT BY YARDS. 12. HAVING REGARD TO THE ABOVE FACTS, IT IS EVIDENT THAT THE DECISION OF HON'BLE APEX COURT, IN THE CASE OF SARIFABIBI MOHMED IBRAHIM & OTHERS V CIT (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE, INCLUD ING THE TESTS AND GUIDELINES LAID DOWN BY THE HON'BLE SUPRE ME COURT, THEREIN. IN THE PRESENT CASE, THE LAND DOES NOT FALL UNDER THE DEFINITION OF CAPITAL ASSET, AS CONTAINED U/S 2(14)(III) (A) (B) OF THE ACT. THE REVENUE FAILED TO BRING ON RECORD ANY MATERIAL, TO REBUT THE CLEAR CONTENTS AN D CONTENTIONS OF THE LETTER, EMANATING FROM THE OFFIC E OF TEHSILDAR, IN THE MATTER. THE SAID CASE LAW RELIED UPON BY THE REVENUE WAS DECIDED BY THE APEX COURT WHEREBY T HE LAND WAS SITUATED WITHIN THE MUNICIPAL LIMITS OF SU RAT. IN THE PRESENT CASE, LAND IS SITUATED OUTSIDE THE MUNI CIPAL LIMIT. IN THE CASE LAW RELIED UPON BY THE REVENUE, PLOT WAS SOLD ON PER SQ.YD. BASIS WHEREAS, IN THE PRESEN T CASE, LAND WAS PURCHASED AND SOLD ON BIGHA BASIS. IN THE PRESENT CASE, AGRICULTURAL OPERATIONS WERE UNDE RTAKEN ON THE SAID LAND, ON THE DATE OF PURCHASE AS WELL A S ON THE DATE OF SALE, AS IS EVIDENT FROM CLEAR CONTENTS OF THE LETTER OF TEHSILDAR, REPRODUCED ABOVE. HOWEVER, IN THE CASE, RELIED UPON BY THE REVENUE, NO AGRICULTURAL OPERATIONS WERE CARRIED ON, FOR THE LAST FOUR YEARS . THE ASSESSEE APPELLANT, IN THE CASE RELIED UPON BY THE REVENUE, HAD APPLIED FOR PERMISSION TO SELL THE LAN D FOR NON-AGRICULTURAL PURPOSES U/S 63 OF THE LAND REVENU E 27 CODE. IN THE PRESENT CASE, NO SUCH PERMISSION WAS E VER APPLIED FOR BY THE APPELLANT. IT IS, FURTHER, ADDED THAT 15 YEARS BACK, A PARCEL OF 2607 SQ.YD. OUT OF THIS VER Y LAND, IN THE CASE RELIED UPON BY THE REVENUE, WAS CONVERT ED BY THE ASSESSEE, TO NON-AGRICULTURAL USE, BY CONSTRUCT ING A CHAWL ON IT, BY THE OWNER THEMSELVES. THERE IS NO SUCH CONVERSION OF LAND IN THE PRESENT CASE. IN VIEW OF THIS, THE FACTS OF THE PRESENT CASE ARE MATERIALLY DIFFER ENT AND DISTINGUISHABLE AND HENCE, THE DECISION OF THE HON' BLE SUPREME COURT, IN THE CASE OF SARIFABIBI MOHMED IBR AHIM & OTHERS V CIT (SUPRA) IS NOT APPLICABLE TO THE FAC TS OF THE PRESENT CASE. THE ASSESSEE HAD ADDUCED EVIDENCE IN THE FORM OF LETTER FROM TEHSILDAR, REFERRED TO ABOVE, A ND KHASRA GIRDAWARI (PB-23) WHEREBY UNREBUTTABLE DETAI LS AND INFORMATION HAD BEEN ADDUCED BY THE ASSESSEE. REVENUE HAS FAILED TO REBUT SUCH RELEVANT AND MATER IAL EVIDENCES CONTAINED IN THE SAID LETTER/DOCUMENT. T HIS LETTER IS A DOCUMENTARY EVIDENCE, EMANATING FROM TH E OFFICE OF TEHSILDAR AND THE SAME CANNOT BE REBUTTED BY ORAL EVIDENCES, AS HAS BEEN DONE BY THE REVENUE. I N THE CASE OF PARAMJIT SINGH V ITO (2010) 323 ITR 588 (P& H), THE HON'BLE JURISDICTIONAL HIGH COURT HELD THAT IT IS A WELL KNOWN PRINCIPLE THAT NO ORAL EVIDENCE IS ADMISSIBLE , ONCE THE DOCUMENT CONTAINS ALL THE TERMS AND CONDITIONS, IN THE LIGHT OF THE PROVISIONS OF SECTION 91 & 92 OF THE E VIDENCE ACT, WHICH INCORPORATE THE SAID PRINCIPLE. 13. THE LAND IN QUESTION IS RECORDED AS AGRICULTURE LAND, IN THE REVENUE RECORD, ON THE DATE OF PURCHASE AND SALE OF THE SAME. THE LAND IS ASSESSED TO LAND REVENUE. T HE ASSESSEE HAS NOT TAKEN ANY STEP TILL THE DATE OF SA LE, TO CONVERT THE AGRICULTURAL LAND TO NON-AGRICULTURAL P URPOSES AND TO UNDERTAKE ANY IMPROVEMENT PROJECT ON SUCH LA ND. THE ASSESSEE HAS SHOWN THE LAND AS FIXED ASSET, IN HIS AUDITED BOOKS OF ACCOUNT. CUMULATIVE EFFECT OF ALL THESE MATERIAL EVIDENCES CLEARLY SUGGESTS THAT THE LAND I N QUESTION IS AGRICULTURAL LAND AND THE LAND DOES NOT FALL UNDER THE DEFINITION OF CAPITAL ASSET, WITHIN THE M EANING 28 OF SECTION 2(14)(III) OF THE ACT. IT IS, FURTHER, MENTIONED THAT THE FACT THAT THE LAND WAS SOLD TO INDUSTRIALI ST FOR SETTING UP INDUSTRIAL UNITS, IS OF NO LEGAL CONSEQU ENCE, IN DETERMINING THE NATURE AND CHARACTER OF THE LAND IN QUESTION. THE LAND REMAINED AGRICULTURAL LAND TILL IT WAS SOLD TO VARIOUS PARTIES. THE FUTURE USE BY THE PUR CHASER IS ALSO IRRELEVANT AND IMMATERIAL FOR THE PURPOSE O F DETERMINATION OF TRUE CHARACTER AND NATURE OF THE L AND IN QUESTION. THE HON'BLE HIGH COURT OF BOMBAY, IN THE CASE OF CIT V SMT. DEBBIE ALEMAO (2011) 239 CTR (BOM) 23 26 HELD THAT LAND, WHICH WAS SHOWN AS AGRICULTURAL LAN D IN THE REVENUE RECORDS AND NEVER SOUGHT TO BE USED FOR NON AGRICULTURAL PURPOSES BY THE ASSESSEE, TILL IT WAS SOLD, HAS TO BE TREATED AS AGRICULTURAL LAND, EVEN THOUGH NO AGRICULTURE INCOME WAS SHOWN BY THE ASSESSEE FROM T HIS LAND AND THEREFORE, NO CAPITAL GAIN WAS TAXABLE ON THE SALE OF THE SAID LAND. SIMILARLY, HON'BLE GUJRAT H IGH COURT IN THE CASE OF SERCON PVT. LTD. V CIT 136 ITR 881 HELD THAT IT IS WELL SETTLED LAW THAT THE CHARACTER OF THE LAND, NAMELY WHETHER IT IS AGRICULTURAL LAND OR WHE THER IT HAS CEASED TO BE AGRICULTURAL LAND, HAS TO BE JUDGE D AS ON THE DATE OF SALE. THE HON'BLE GUJRAT HIGH COURT, ON THE FACTS OF THE CASE, FURTHER, HELD THAT SINCE THE LAN D, AT THE TIME OF SALE WAS ENTERED IN GOVERNMENT REVENUE RECO RDS AS AGRICULTURAL LAND, A PRESUMPTION AROSE THAT IT W AS AGRICULTURAL LAND IN CHARACTER AND THE SURPLUS REAL IZED ON ITS SALE WAS NOT CAPITAL GAINS LIABLE TO TAX. 14. THE REVENUE HAS FAILED TO BRING MATERIAL ON REC ORD TO DEMONSTRATE THAT THE ASSESSEE IS A DEALER IN LANDS. THE ASSESSEE HAS SHOWN THE LANDS IN HIS AUDITED BALANCE SHEET AS FIXED ASSETS AND THIS FACTUM REMAINED UNREBUTTED BY THE REVENUE, AND IS A RELEVANT FACTOR IN UNFOLDING THE INTENTION OF THE ASSESSEE. MERE FREQ UENCY OF PURCHASE AND SALE OF LAND IS NOT A CONCLUSIVE EV IDENCE OF CARRYING ON BUSINESS ACTIVITIES AS TRADER OR DE ALER IN LAND. THE HON'BLE BOMBAY HIGH COURT, IN THE CASE O F INDIAN HUME PIPE CO. LTD. V CIT, 195 ITR 386 (BOM) HELD 29 THAT WHERE NO DEVELOPMENT HAS BEEN CARRIED OUT, TO MAKE THE LAND READILY MARKETABLE AND SALE OF THE PLOT OF LANDS DURING DIFFERENT YEARS, WOULD NOT CONSTITUTE TRANSA CTIONS AS A TRADER. SIMILARLY, MADHYA PRADESH HIGH COURT IN THE CASE OF CIT V SMT. BILKISHBAI 225 ITR 570 (MP) HELD THAT REPEATED SALES AND PURCHASES OF AGRICULTURAL LAND I S NOT ADVENTURE IN NATURE OF TRADE, AS NO SYSTEMATIC BUSI NESS ACTIVITIES INVOLVE. THEREFORE, THE SURPLUS ON SALE OF LAND CANNOT BE ASSESSED AS BUSINESS INCOME. SIMILAR VIE W HAS BEEN HELD BY THE JURISDICTIONAL HIGH COURT, IN THE CASE OF CIT V SUSHILA DEVI JAIN 259 ITR 671. 15. HAVING REGARD TO THE FACT-SITUATION OF THE PRES ENT CASE, IT IS EVIDENT THAT THE PRESENT LANDS IN QUEST ION DO NOT CONSTITUTE CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14)(III) OF THE ACT. THEREFORE, SURPLUS REALIZED ON SALE OF SUCH LANDS CANNOT BE TAXED AS CAPITAL GAINS U/S 45 R.W. SECTION 10(37) OF THE ACT. THE PROVISIONS OF SECTIO N 10(37) WERE INSERTED BY THE FINANCE ACT 2004 (NO.2) W.E.F . 1.4.2005. THE REVENUE MERELY MADE AN ASSERTION AND TREATED THE SURPLUS REALIZED FROM THE SALE OF RURAL AGRICULTURAL LANDS AS BUSINESS PROFIT, WHICH DONT FALL U/S 2(14) OF THE ACT. THEREFORE, HAVING REGARD TO THE FACT- SITUATION OF THE PRESENT CASE, RELEVANT RECORD AND JUDICIAL VERDICTS, THE SURPLUS REALIZED ON SALE OF SUCH LAND , IS NOT TAXABLE RECEIPTS. IN VIEW OF THE ABOVE LEGAL AND AC TUAL DISCUSSIONS, WE ARE OF THE CONSIDERED OPINION THAT FINDINGS OF THE CIT(A), BASED ON BARE ASSERTIONS, I N THE FACE OF DOCUMENTARY EVIDENCE, FILED BY THE ASSESSEE , TO SUPPORT HIS CLAIM, AS DISCUSSED ABOVE, CANNOT BE UP HELD. ACCORDINGLY, APPEAL OF THE ASSESSEE IS ALLOWED. 16. AS THE FACTS AND GROUNDS OF APPEAL RAISED IN IT A NO. 228/CHD/2010 ARE SIMILAR TO THAT OF RAISED IN ITA N O. 227/CHD/2010, FINDINGS GIVEN IN ITA NO. 227/CHD/201 0 WOULD APPLY MUTATIS MUTANDIS TO ITA NO. 228/CHD/201 0. 30 17. IN THE RESULT, BOTH APPEALS OF THE ASSESSEE ARE ALLOWED . 5. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBU NAL IN ASSESSEE'S OWN CASE IN ITA NO. 227 & 228/CHD/2010, THE PRESENT TWO APPEALS OF THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH APRIL,2012. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 27 TH APRIL,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH