Shri VINIT K Goyal, Pune V. ACIT, Pune

ITA 1300/PUN/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8481 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 15-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS S PRAVEENA
• Keywords: Capital asset; Business income; Cost of acquisition; Revised return
• Section: 143(3); 2(14); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.1299/PN/2012 (ASSESSMENT YEAR : 2008-09) SHRI KRISHNAKUMAR K GOYAL, SHOP NO.7 & 8, PRESTIGE PLAZA, PHASE-II, PUNE MUMBAI ROAD, AKURDI, PUNE 411 035. PAN : AASPG3891P . APPELLANT VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-9, PUNE. . RESPONDENT ITA NO.1300/PN/2012 (ASSESSMENT YEAR : 2008-09) SHRI VINIT K GOYAL, SHOP NO.7 & 8, PRESTIGE PLAZA, PHASE-II, PUNE MUMBAI ROAD, AKURDI, PUNE 411 035. PAN : AEMPG4196B . APPELLANT VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE-9, PUNE. . RESPONDENT ASSESSEE BY : MR. SUNIL GANOO DEPARTMENT BY : MRS. S. PRAVEENA DATE OF HEARING : 25-07-2014 DATE OF PRONOUNCEMENT : 15-09-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED TWO APPEALS HAVE BEEN PREFERRED BY TW O DIFFERENT ASSESSEES BELONGING TO THE SAME FAMILY AND CERTAIN ISSUES INVOLVED ARE COMMON, THEREFORE, THEY HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. FIRST, WE SHALL TAKE-UP THE APPEAL VIDE ITA NO.1 299/PN/2012 IN THE CASE OF SHRI KRISHNAKUMAR K. GOYAL WHICH IS DIRECTE D AGAINST THE ORDER OF THE ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DATED 04.04.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 31.12.2010 PAS SED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2008-09. 3. IN THIS APPEAL, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS UNDER :- 1. COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED IN CONFIRMING ASSESSING OFFICERS ACTION OF ASSESSING RS.1,40,40,140.00 AS BUSINESS INCOME AGAINST APPELL ANTS CLAIM OF EXEMPTION BEING SURPLUS ON SALE OF AGRICULTURAL LAN D AT DHAMANE, WHICH IS HELD BY ASSESSEE AS INVESTMENT AND IS NOT WITHIN DEFINITION OF CAPITAL ASSET. APPELLANT PRAYS FOR EXCLUSION OF THE SAME FROM COMPUTATION OF INCOME. 2. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN CONFIRMING IN ASSESSING SURPLUS ON SALE OF KONDHWA PLOT UNDER THE BUSINESS INCOME AGAINST APPELLANTS CLAIM OF CAPITAL GAIN, SAME BEING NOT A BUSINESS/TRADING ASSET. 4. IN BRIEF, THE FACTS ARE THAT ASSESSEE IS AN INDI VIDUAL WHO FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 29.09. 2008 DECLARING TOTAL INCOME OF RS.9,63,17,030/- WHICH WAS REVISED TO RS. 9,60,50,160/- BY FILING A REVISED RETURN. THE RETURN FILED BY THE ASSESSEE W AS PICKED-UP FOR SCRUTINY ASSESSMENT WHEREIN THE TOTAL INCOME HAS BEEN ASSESS ED AT RS.11,04,92,366/. THE DIFFERENCE BETWEEN THE RETURNED AND THE ASSESSE D INCOME WAS ON TWO ASPECTS. FIRSTLY, THE ASSESSEE HAD SOLD AGRICULTUR AL LAND AT DHAMANE VILLAGE, THE SURPLUS WHEREOF WAS TREATED AS NOT LIABLE TO BE TAXED AS IT WAS NOT A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) (III)(B) OF THE ACT. THE ASSESSING OFFICER, HOWEVER, TREATED THE TRANSACTION OF THE SALE OF AGRICULTURAL LAND AS A BUSINESS PROFIT AND ACCORDINGLY ADDED A SUM OF RS.1,40,21,140/- TO THE RETURNED INCOME. SECONDLY, THE ASSESSEE HAD EA RNED GAIN ON SALE OF A PIECE OF LAND AT KONDHWA WHICH WAS TREATED AS A LON G TERM CAPITAL GAIN, BUT IT HAS BEEN TREATED BY THE ASSESSING OFFICER AS A BUSI NESS TRANSACTION THEREBY ADDING A SUM OF RS.40,11,300/- TO THE RETURNED INCO ME. BOTH THE AFORESAID ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 ACTIONS OF THE ASSESSING OFFICER HAVE SINCE BEEN AF FIRMED BY THE CIT(A). NOT BEING SATISFIED WITH THE ORDER OF THE CIT(A), ASSES SEE IS IN FURTHER APPEAL BEFORE US CHALLENGING THE AFORESAID ACTION OF THE A SSESSING OFFICER BY WAY OF AFORESTATED GROUNDS OF APPEAL. 5. IN SO FAR AS THE FIRST GROUND OF APPEAL IS CONCE RNED, IT RELATES TO SURPLUS EARNED BY THE ASSESSEE OF RS.1,40,21,140/- OUT OF T HE SALE OF AGRICULTURAL LAND SITUATED AT DHAMANE VILLAGE. IN THE RETURN OF INCO ME ASSESSEE CLAIMED THAT THE LAND IN QUESTION WAS NOT A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14)(III)(B) OF THE ACT AND THUS SURPLUS ON SALE O F SUCH LAND WAS NOT LIABLE TO BE TAXED AS CAPITAL GAINS. 6. THE ASSESSING OFFICER, HOWEVER, NOTED THAT ONE O F THE BUSINESS ACTIVITIES OF THE ASSESSEE WAS SALE/PURCHASE OF PLO TS AND INCOME FROM SUCH ACTIVITY WAS BEING REGULARLY OFFERED BY THE ASSESSE E AS BUSINESS PROFITS. THEREFORE, ACCORDING TO THE ASSESSING OFFICER, THE SURPLUS ON SALE OF AGRICULTURAL LAND COULD NOT BE TREATED AS GAIN ARIS ING FROM SALE OF INVESTMENT, BUT INSTEAD IT WAS LIABLE TO BE ASSESSED AS BUSINE SS INCOME. ON BEING SHOW- CAUSED, ASSESSEE CONTENDED BEFORE THE ASSESSING OFF ICER THAT THE LAND AT VILLAGE DHAMANE WAS LOCATED BEYOND A DISTANCE OF 8 KILOMETERS FROM THE LOCAL LIMITS OF THE MUNICIPALITY AND POPULATION OF THE VI LLAGE WAS LESS THAN TEN THOUSAND AND THEREFORE IT DID NOT FALL WITHIN THE D EFINITION OF CAPITAL ASSET AS PER SECTION 2(14)(III) OF THE ACT. IT WAS ALSO POI NTED OUT THAT THE LAND IN QUESTION WAS AN AGRICULTURAL LAND AND AGRICULTURAL ACTIVITY WAS CARRIED OUT ON THE SAID LAND BY ONE SHRI DILIP DAGDU JOGDAND ON BE HALF OF THE ASSESSEE. THE ASSESSING OFFICER, HOWEVER, WAS NOT IMPRESSED W ITH THE ARGUMENTS PUT- FORTH BY THE ASSESSEE AND ACCORDING TO HIM THE TRAN SACTION OF PURCHASE AND SALE OF AGRICULTURAL LAND AT VILLAGE DHAMANE WAS A TRANSACTION OF BUSINESS AND THE PROFITS EARNED THEREON BY THE ASSESSEE WERE LIA BLE TO BE TAXED AS BUSINESS INCOME. THE CIT(A) HAS ALSO AFFIRMED THE STAND OF THE ASSESSING OFFICER. ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 7. IN THE ABOVE BACKGROUND, THE LEARNED COUNSEL FOR THE ASSESSEE HAS MADE HIS SUBMISSIONS. ACCORDING TO HIM, THE ASSESS EE HAS SHOWN THE LAND AT VILLAGE DHAMANE AS A PERSONAL ASSET IN THE BALANCE- SHEET AS DISTINCT FROM BUSINESS ASSETS AND THEREFORE THE SAME COULD NOT BE TREATED AS PART OF STOCK- IN-TRADE SO AS TO BE TREATED AS A BUSINESS TRANSACT ION. THE LEARNED COUNSEL HAS REFERRED TO THE EXHAUSTIVE SUBMISSIONS MADE BEF ORE THE CIT(A), AND WHICH HAVE BEEN REPRODUCED BY HIM IN PARA 6 OF HIS ORDER, IN SUPPORT OF THE CASE OF THE ASSESSEE. PERTINENTLY, IT IS SOUGHT TO BE MADE OUT BY THE LEARNED COUNSEL THAT MERELY BECAUSE ASSESSEE HAD A BUSINESS OF SALE/PURCHASE OF PLOTS WOULD BY ITSELF NOT IMPLY THAT THE SURPLUS EA RNED ON SALE OF THE AGRICULTURAL LAND AT VILLAGE DHAMANE WAS A BUSINESS TRANSACTION. IT HAS BEEN POINTED OUT THAT EVEN A PERSON CARRYING ON BUSINESS CAN HAVE AN INVESTMENT PORTFOLIO IN THE SAME COMMODITIES AND THE INVESTMEN T PORTFOLIO WAS TO BE TREATED AS CAPITAL ASSET. IN THIS CONTEXT, RELIA NCE HAS ALSO BEEN PLACED ON THE CBDT CIRCULAR NO.4 OF 2007 DATED 15.06.2007. IT HA S BEEN POINTED OUT THAT BETWEEN THE DATE OF PURCHASE OF AGRICULTURAL LAND A ND SALE THEREOF ASSESSEE HAS NOT CHANGED THE LAND USE AND IN-FACT, THE LAND HAS BEEN ULTIMATELY SOLD TO AGRICULTURISTS ONLY. REFERENCE HAS ALSO BEEN MADE TO 7/12 EXTRACTS OF THE LAND TO SHOW THAT IN THE LAND REVENUE RECORDS THE CHARAC TER OF THE LAND WAS AN AGRICULTURAL LAND. FOR ALL THE ABOVE REASONS, IT H AS BEEN SOUGHT TO BE MADE OUT THAT THE LOWER AUTHORITIES ERRED IN TREATING TH E PURCHASE AND SALE OF LAND AT VILLAGE DHAMANE TO BE A BUSINESS TRANSACTION. 8. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE APPEARING FOR THE REVENUE HAS SUBMITTED THAT ASSESSEE BEING A LAND DEVELOPER, IT IS A NATURAL COROLLARY THAT THE IMPUGNED GAIN IS LIABLE TO BE TAXED AS BUSINESS INCOME. FURTHERMORE, IT HAS BEEN POINTED OUT THAT THE ACTION OF THE ASSESSEE OF HAVING GIVEN THE LAND FOR CULTIVATION TO SHRI DI LIP DAGDU JOGDAND DOES NOT JUSTIFY THE INFERENCE THAT THE LAND WAS CULTIVATED BY THE ASSESSEE. IT IS SUBMITTED THAT THE AFORESAID ARRANGEMENT WAS BEING SHOWN WITH THE PURPOSE ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 OF GIVING COLOUR TO THE LAND OF BEING UNDER CULTIVA TION. THE LEARNED DEPARTMENTAL REPRESENTATIVE POINTED OUT THE SUBSEQU ENT ACT OF THE ASSESSEE OF SELLING THE LAND AT A HUGE SURPLUS WITHIN A SHOR T SPAN OF TIME ALSO SHOWS THE PRIMARY INTENTION OF THE ASSESSEE AT THE TIME OF PU RCHASE OF LAND, BEING IN THE NATURE OF A BUSINESS TRANSACTION. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. FACTUALLY SPEAKING, THE LAND IN QUESTION IS LOCATED AT VILLAG E DHAMANE ADMEASURING 106 ACRES. THE APPELLANT ALONGWITH OTHER CO-OWNERS PUR CHASED THE LAND FROM THE LOCAL AGRICULTURISTS ON 10.05.2006. THE TOTAL COST OF ASSESSEES SHARE OF THE LAND IS RS.12,28,860/- AND IN THE BALANCE SHEET AS ON 31.03.2007 ANNEXED WITH THE RETURN OF INCOME FILED FOR THE EARLIER ASS ESSMENT YEAR 2007-08, IT HAS BEEN SHOWN AS A PART OF PERSONAL ASSETS. DURING TH E YEAR UNDER CONSIDERATION I.E. ON 25.10.2007, THE SAME WAS SOLD AND ASSESSEE S SHARE IN THE SURPLUS ON SALE AMOUNTING TO RS.1,40,21,140/- WAS CLAIMED AS E XEMPT, BEING SALE OF AGRICULTURAL LAND. THE CLAIM OF THE ASSESSEE IS TH AT THE LAND IN QUESTION IS LOCATED AT A DISTANCE WHICH IS BEYOND 8 KILOMETERS FROM THE LOCAL LIMITS OF ANY MUNICIPALITY AND THE POPULATION OF THE VILLAGE IN W HICH SUCH LAND IS SITUATED IS LESS THAN TEN THOUSAND AND THEREFORE IT QUALIFIES T O BE AN AGRICULTURAL LAND, WHICH IS EXCLUDIBLE FROM THE EXPRESSION CAPITAL AS SET AS DEFINED IN CLAUSE (III) OF SUB-SECTION (14) OF SECTION 2 OF THE ACT. IT IS EMERGING FROM THE RECORD THAT IN SUPPORT OF ABOVE PROPOSITION, ASSESSEE FURNISHED A COMMUNICATION FROM TALATHI OF DHAMANE VILLAGE DEMONSTRATING THAT THE L AND WAS MORE THAN 25 KILOMETERS AWAY FROM THE NEAREST MUNICIPAL LIMITS. A CERTIFICATE FROM THE OFFICE OF TEHSILDAR DATED 07.09.2007 WAS ALSO FURNISHED BE FORE THE LOWER AUTHORITIES TO SHOW THAT THE POPULATION OF VILLAGE DHAMANE AS P ER THE LAST CENSUS WAS 780 WHICH IS BELOW TEN THOUSAND. IT IS ALSO AN ACCEPTE D POSITION THAT THE LAND IN QUESTION WAS AN AGRICULTURAL LAND NOTIFIED IN THE L AND REVENUE RECORDS. IN SUPPORT OF THE SAME, A CERTIFICATE OF DY. DIRECTOR, TOWN PLANNING CERTIFYING THAT THE LAND HAS BEEN CLASSIFIED AS AN AGRICULTURAL LAN D IN LAND REVENUE RECORD IS ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 FORMING PART OF THE SALE-DEED, A COPY OF WHICH HAS ALSO BEEN PLACED IN THE PAPER BOOK FILED BEFORE US. ALL THE AFORESAID FEAT URES PERTAINING TO THE LAND ARE NOT IN DISPUTE. HOWEVER, THE STAND OF THE REVE NUE IS THAT ASSESSEE BEING AN INDIVIDUAL ENGAGED IN THE BUSINESS OF PURCHASE A ND SALE OF LANDS, THE INTENTION TO PURCHASE THE IMPUGNED LAND WAS A BUSIN ESS PROPOSITION AND NOT MERELY INVESTMENT. 10. IN OUR CONSIDERED OPINION, THE ISSUE AS TO WHET HER IMPUGNED TRANSACTION IS AN ACTIVITY IN THE NATURE OF TRADE O R AN INVESTMENT IS A QUESTION WHICH IS REQUIRED TO BE ADDRESSED HAVING REGARD TO THE PECULIAR FACTS OF THE CASE. IN THE PRESENT CASE, ONE OF THE BUSINESSES O F THE APPELLANT IS PURCHASE AND SALE OF LANDS. THE INCOME FROM SUCH ACTIVITY I N THE PAST HAS BEEN OFFERED AS BUSINESS INCOME. SO HOWEVER, THE AFORESAID FACT OR IPSO FACTO CANNOT BE CONCLUSIVE TO ESTABLISH THAT THE PURCHASE AND SALE OF AGRICULTURAL LAND AT DHAMANE VILLAGE IS ALSO TO BE ASSESSED AS A BUSINES S TRANSACTION. WE SAY SO FOR THE REASON THAT IT IS POSSIBLE FOR A TAXPAYER T O HAVE TWO PORTFOLIOS I.E. AN INVESTMENT PORTFOLIO COMPRISING OF COMMODITIES WHIC H ARE TO BE TREATED AS CAPITAL ASSETS AND A TRADING PORTFOLIO COMPRISING O F STOCK-IN-TRADE WHICH ARE TO BE TREATED AS TRADING ASSETS. THEREFORE, IT IS CON CEIVABLE THAT AN ASSESSEE HAVING TWO PORTFOLIOS WOULD HAVE INCOME UNDER BOTH HEADS I.E. CAPITAL GAINS AS WELL AS BUSINESS INCOME. THE AFORESAID PRINCIPLE H AS ALSO BEEN ACCEPTED BY THE CBDT IN ITS CIRCULAR NO.4 OF 2007 (SUPRA). BE THAT AS IT MAY, IN THE PRESENT CASE, THE ASSERTIONS OF THE ASSESSEE BEFORE THE LOW ER AUTHORITIES AS WELL AS BEFORE US HAVE BEEN THAT THE INVESTMENT MADE IN THE PURCHASE OF AGRICULTURAL LAND AT VILLAGE DHAMANE WAS NOT WITH THE INTENTION OF ACQUIRING STOCK-IN-TRADE OF BUSINESS. FIRSTLY, IT IS ASSERTED THAT THE LAND AT DHAMANE VILLAGE HAS BEEN SHOWN IN THE BALANCE SHEET AS A PART OF PERSONAL A SSETS AND NOT AS A PART OF BUSINESS ASSETS. FOR THIS PURPOSE, THE BALANCE S HEET AS ON 31.03.2007 ANNEXED TO THE RETURN OF INCOME FOR THE EARLIER ASS ESSMENT YEAR 2007-08 HAS ALSO BEEN PLACED ON RECORD. SECONDLY, IT HAS ALSO BEEN POINTED OUT THAT ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 ASSESSEE HAD MADE INVESTMENTS IN PURCHASE OF OTHER AGRICULTURAL LANDS ALSO IN THE PAST YEARS AND THAT THE SAME HAVE NOT BEEN TREA TED TO BE BUSINESS ASSETS. IN THIS CONNECTION, A TABULATION HAS BEEN FURNISHED IN THE COURSE OF HEARING WHICH SHOWS THAT ASSESSEE HAS PURCHASED AGR ICULTURAL LANDS AT VARIOUS PLACES LIKE LATUR, CHOWISAWADI, ETC. AS EAR LY AS IN JANUARY, 1991. THEREAFTER, INVESTMENT IN AGRICULTURAL LANDS HAVE A LSO BEEN MADE IN APRIL 1996, MAY 1995, NOVEMBER, 1996, ETC.. THE TABULATI ON ALSO REVEALS THAT THE OTHER AGRICULTURAL LANDS CONTINUE TO BE HELD BY THE ASSESSEE AND IT IS ONLY THE LAND AT VILLAGE DHAMANE WHICH HAS BEEN SOLD DURING THE YEAR UNDER CONSIDERATION. PRIMA-FACIE, THE AFORESAID TABULATI ON DOES NOT SHOW THAT ASSESSEE WAS A DEALER IN PURCHASE AND SALE OF AGRIC ULTURAL LANDS BECAUSE THE PERIOD OF HOLDING IN ALL CASES EXCEPT THE LAND AT V ILLAGE DHAMANE IS QUITE SUBSTANTIAL. PERTINENTLY, ASSESSEE HAS TAKEN US TH ROUGH THE BALANCE SHEETS FILED ALONGWITH RESPECTIVE RETURNS OF INCOME FROM T HE EARLIER ASSESSMENT YEARS OF 2004-05, 2005-06, 2006-07 AS WELL AS 2007-08 TO POINT OUT THAT THE AFORESAID LANDS HAVE BEEN SHOWN IN THE BALANCE SHEE T AS PERSONAL ASSETS AND NOT AS BUSINESS ASSETS. 11. AT THIS STAGE, WE MAY DEAL WITH ONE OF THE OBSE RVATIONS MADE BY THE ASSESSING OFFICER, AND THE SAME HAS ALSO BEEN AFFIR MED BY THE CIT(A), WHICH IS TO THE EFFECT THAT SUBSEQUENT TO PURCHASE OF THE LAND IN QUESTION ASSESSEE HAS DONE LAND CONSOLIDATION AND DEVELOPMENT ACTIVIT Y SO AS TO IMPROVE THE QUALITY OF LAND. THE DISCUSSION MADE BY THE ASSESS ING OFFICER IN THIS REGARD READ AS UNDER :- 5. WHETHER THERE WAS ANY ACT SUBSEQUENT TO THE PUR CHASE TO IMPROVE QUALITY OF THE COMMODITY PURCHASED? THOUGH IT IS NOT KNOWN AS TO WHETHER THERE WAS ANY ACT SUBSEQUENT TO THE PURCHASE TO IMPROVE QUALITY OF THE LAND PURCHAS ED, BUT THE FACT THAT THE ASSESSEE HAS GOT A SALE CONSIDERATION OF RS.1,53,50 ,000/- FOR A PURCHASE COST OF RS.13,28,860/- WITHIN A SPAN OF JUST ONE AND A H ALF YEAR POINTS TO THE FACT THAT THERE MUST BE A LAND CONSOLIDATION AND LAND DE VELOPMENT ACTIVITY ON THE PART OF THE ASSESSEE ON THE SAID LAND TO IMPROVE IT S QUALITY. ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 12. ON THIS ASPECT, THE CIT(A) HAS ALSO NOTED THAT THE ENTIRE LAND COMPRISING OF 106 ACRES WAS PURCHASED BY ASSESSEE A LONGWITH OTHER CO- OWNERS BY FOUR SEPARATE AGREEMENTS. 13. IN THIS CONTEXT, WE FIND THAT ASSESSEE SUBMITTE D THAT THE LAND WAS PURCHASED FOR HOLDING AS INVESTMENT AND TO CARRY ON AGRICULTURAL ACTIVITY AS A PRIDE CULTIVATION OF MEDICINAL PLANT AND HORTICULTU RE. BY WAY OF DETAILED SUBMISSIONS, WHICH HAVE BEEN REPRODUCED IN THE ORDE R OF THE CIT(A), ASSESSEE SUBMITTED THAT THE INTENTION WAS TO PURCHA SE LAND TO CARRY OUT AGRICULTURAL ACTIVITY OF MEDICINAL PLANT AND HORTIC ULTURE. HOWEVER, DUE TO THE INABILITY OF THE OTHER CO-OWNERS TO RAISE REQUISITE FUNDS ASSESSEE WAS FORCED TO SELL THE LAND AS IT IS. IT IS ALSO SUBMITTED THAT DURING THE PERIOD OF HOLDING OF THE LAND IT WAS LEASED OUT TO ONE SHRI DILIP DAGDU JOGD AND IN TERMS OF LEASE AGREEMENT TO CARRY OUT AGRICULTURAL ACTIVITIES. AS SESSEE HAS ALSO SHOWN INCOME IN THE RETURN OF INCOME FROM SUCH ACTIVITY I N ASSESSMENT YEAR 2007-08 AS WELL AS DURING THE YEAR UNDER CONSIDERATION. IN -FACT, THERE IS NO MATERIAL LEAD BY THE REVENUE TO NEGATE ANY OF THE AFORESAID ASSERTIONS OF THE ASSESSEE. THERE IS NO DENYING THE FACT THAT THE LA ND IN QUESTION CONTINUES TO BE AN AGRICULTURAL LAND IN THE LAND REVENUE RECORDS AND FURTHER DURING THE PERIOD OF ASSESSEES HOLDING, NO STEPS HAVE BEEN TA KEN TO CHANGE THE LAND USE FOR ANY NON-AGRICULTURAL ACTIVITIES. IN-FACT, THE CHARGE MADE BY THE ASSESSING OFFICER THAT SUBSEQUENT TO PURCHASE, ASSE SSEE UNDERTOOK DEVELOPMENT ACTIVITY IS A BALD ASSERTION AND IS QUI TE UNCONVINCING. IN-FACT, THE ASSESSING OFFICER MERELY RECORDS THAT THERE MUST BE A LAND CONSOLIDATION AND LAND DEVELOPMENT ACTIVITY ON THE PART OF THE ASSESS EE ON THE SAID LAND TO IMPROVE ITS QUALITY. THE SIGNIFICANCE OF THE AFORESAID OBSERVATIONS OF T HE ASSESSING OFFICER IS THAT IT IS BASED ON MERE PRESU MPTIONS AND NOT ON ANY MATERIAL OR EVIDENCE. IN-FACT, IN THE COURSE OF HE ARING, THE LEARNED COUNSEL ALSO REFERRED TO THE FACT THAT THE LAND HAS BEEN UL TIMATELY SOLD TO AN AGRICULTURIST FOR AGRICULTURAL PURPOSES ONLY. IT W AS ALSO ASSERTED THAT THE ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 PURCHASERS ARE USING IT FOR AGRICULTURAL PURPOSES O NLY. BEFORE THE CIT(A), ASSESSEE POINTED OUT THAT THE ASSESSING OFFICER HAD ISSUED SUMMONS/NOTICES TO THE PURCHASERS, COPIES OF WHICH HAVE BEEN PLACED IN THE PAPER BOOK AT PAGES 371 TO 375. THE ASSERTIONS OF THE APPELLANT ARE THAT SUCH PERSONS APPEARED BEFORE THE ASSESSING OFFICER AND CONFIRMED THAT THEY WERE CARRYING OUT AGRICULTURAL OPERATIONS ON SUCH LANDS. IN THIS CONTEXT, WE FIND THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER. HOWEVER, IT WO ULD NOT BE OUT OF PLACE TO MENTION HERE THAT THERE IS NO CREDIBLE MATERIAL BRO UGHT ON RECORD BY THE ASSESSING OFFICER TO NEGATE ASSESSEES PLEA THAT TH E LAND IN QUESTION CONTINUED TO BE IN THE NATURE OF AGRICULTURAL LAND EVEN AFTER IT SALE. 14. IN VIEW OF THE AFORESAID DISCUSSION, IT IS QUIT E CLEAR THAT THE LAND IN QUESTION HAS BEEN DISCLOSED BY THE ASSESSEE AS INV ESTMENT AND NOT AS STOCK-IN-TRADE. IT IS ALSO CLEAR THAT NO STEPS WER E UNDERTAKEN BY THE ASSESSEE FOR DEVELOPMENT OF PROPERTY DURING THE PERIOD IT HE LD THE SAME. OF-COURSE, IN THE CASE OF OTHER AGRICULTURAL LANDS OWNED BY THE A SSESSEE THE PERIOD OF HOLDING IS QUITE SUBSTANTIAL. THE CIRCUMSTANCES EX PLAINED BY THE ASSESSEE FOR HAVING SOLD THE AGRICULTURAL LAND WITHIN A SPAN OF 17 MONTHS HAVE ALSO NOT BEEN FOUND TO BE FALSE. CONSIDERING THE AFORESAID CIRCUMSTANCES, IN OUR VIEW, THE LOWER AUTHORITIES ERRED IN ASSESSING THE GAIN O N SALE OF SUCH LAND AS A BUSINESS INCOME. 15. AT THIS POINT, WE MAY REFER TO THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BAGUIO INVESTMENT PVT. LTD. VIDE INCOME TAX APPEAL NO.998 OF 2011 DATED 24.01.2013 WHICH HAS BE EN RELIED UPON BY THE ASSESSEE BEFORE US. THE ISSUE BEFORE THE HONBLE H IGH COURT WAS RELATING TO INCOME ON SALE OF LAND WHICH WAS TREATED BY THE ASS ESSING OFFICER AS A SALE OF STOCK-IN-TRADE AND TAXED UNDER THE HEAD INCOME FROM BUSINESS WHEREAS THE ASSESSEE CLAIMED IT AS A SALE OF INVESTMENT ASSESSA BLE UNDER THE HEAD CAPITAL GAINS. THE HONBLE HIGH COURT NOTED THREE FACTUAL FINDINGS ARRIVED AT BY THE ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 TRIBUNAL, NAMELY, (I) THAT THE ASSESSEE HAD DISCLOS ED THE LAND IN ITS BOOKS OF ACCOUNT AS AN INVESTMENT AND NOT STOCK-IN-TRADE; (I I) THAT THE LAND SOLD WAS HELD FOR A PERIOD OF 10 YEARS BY THE ASSESSEE; AND, (III) THAT NO STEPS WERE TAKEN FOR DEVELOPMENT OF PROPERTY BY ASSESSEE DURIN G THE PERIOD IT HELD THE LAND. CONSIDERING THE AFORESAID FEATURES THE HONB LE HIGH COURT AFFIRMED THE ORDER OF THE TRIBUNAL HOLDING THAT THE INCOME ARISI NG ON SALE OF LAND WAS CHARGEABLE UNDER THE HEAD CAPITAL GAINS. 16. FURTHER, A REFERENCE HAS ALSO BEEN MADE TO THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MI NGUEL CHANDRA PAIS & ANR., (2006) 282 ITR 618 (BOM) FOR THE PROPOSITION THAT THE LAND CLASSIFIED AS AGRICULTURAL LAND IN THE LAND REVENUE RECORDS WAS T O BE UNDERSTOOD AS AGRICULTURAL LANDS AND INSUFFICIENCY OF AGRICULTURA L INCOME CANNOT BE A GROUND TO TREAT THE SAME AS A NON-AGRICULTURAL LAND. 17. IN THE PRESENT CASE, IN OUR VIEW, THE FACTUAL M ATRIX CLEARLY ESTABLISHES THAT THE LAND IN QUESTION IS AN AGRICULTURAL LAND W HICH IS SO RECOGNIZED IN THE LAND REVENUE RECORDS AT THE TIME OF PURCHASE BY THE ASSESSEE AND NOTHING HAS BEEN DONE BY THE ASSESSEE FOR PUTTING IT TO NON-AGR ICULTURAL USE. THEREFORE, THE SALE OF SUCH LAND CANNOT BE TREATED AS SALE OF STOCK-IN-TRADE MERELY BECAUSE ASSESSEE IS OTHERWISE ENGAGED IN THE BUSINE SS OF SALE/DEVELOPMENT OF LANDS. IN-FACT, IN OUR CONSIDERED OPINION, THE LOWER AUTHORITIES HAVE BEEN OVERTLY INFLUENCED BY THE FACT THAT ASSESSEE IS IN THE BUSINESS OF PURCHASE AND SALE OF LANDS. NO DOUBT, THE ONUS UNDER SUCH CIRCU MSTANCES IS ON THE ASSESSEE TO SHOW THAT THE IMPUGNED PURCHASE OF AGRI CULTURAL LAND WAS AN INVESTMENT ACTIVITY AND NOT AN ACTIVITY OF ACQUIRIN G STOCK-IN-TRADE. IN OUR VIEW, IN THE PRESENT CASE, SUCH ONUS HAS BEEN APTLY DISCH ARGED BY THE ASSESSEE. EVIDENTLY, THE ASSESSEE HAS SHOWN THE LAND IN QUEST ION AS A PERSONAL ASSET AS DISTINCT FROM BUSINESS ASSETS IN THE BALANCE S HEETS. THE CIRCUMSTANCES IN WHICH THE LAND HAS BEEN SOLD IS ALSO NOT FOUND T O BE FALSE. OTHERWISE, THE ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 AGRICULTURAL LANDS HELD BY THE ASSESSEE ARE FOR A S UBSTANTIAL PERIOD OF TIME AND ASSESSEE HAS BEEN SHOWING SUCH ASSETS AS A PART OF HIS PERSONAL ASSETS, BEING INVESTMENTS AND NOT AS BUSINESS ASSETS IN THE BALANCE SHEET FILED ALONGWITH THE RESPECTIVE RETURNS OF INCOME. AT THI S POINT, WE MAY ALSO MAKE A REFERENCE TO A PLEA RAISED BEFORE THE LOWER AUTHORI TIES WHICH IS TO THE EFFECT THAT ASSESSEE WAS UNDERTAKING AGRICULTURAL ACTIVITI ES. IN THIS CONTEXT, ASSESSEE FURNISHED AN AGREEMENT WITH THE MILITARY FARM KIRKE E, PUNE FOR THE PERIOD 07.07.2005 TO 06.07.2008, A COPY OF WHICH HAS BEEN PLACED AT PAGES 381 TO 392 IN THE PAPER BOOK. IN TERMS OF THE SAID AGREEM ENT, ASSESSEE WAS LEASED OUT THE SOWING RIGHTS OF CROPS IN THE LANDS OWNED B Y MILITARY FARM KIRKEE. ASSESSEE FURTHER SUBMITTED THAT DUE TO CERTAIN DIFF ICULTIES THE AFORESAID AGREEMENT COULD NOT BE COMPLETED BUT THE SAME WAS F URNISHED BEFORE THE LOWER AUTHORITIES TO DEMONSTRATE THAT ASSESSEE WAS INDEED UNDERTAKING AGRICULTURAL ACTIVITIES ALSO. 18. CONSIDERING THE AFORESAID FACTORS AND HAVING RE GARD TO THE JUDGEMENTS OF THE HONBLE BOMBAY HIGH COURT IN THE CASES OF BA GUIO INVESTMENT PVT. LTD. (SUPRA) AND MINGUEL CHANDRA PAIS & ANR. (SUPRA), WE HOLD THAT THE LOWER AUTHORITIES ERRED IN TREATING THE INCOME ARISING ON THE SALE OF LAND AT VILLAGE DHAMANE TO BE SALE OF STOCK-IN-TRADE. IN OUR VIEW, THE INCOME ARISING ON THE SALE OF LAND AT VILLAGE DHAMANE WAS ON ACCOUNT OF S ALE OF INVESTMENT. SINCE, THERE IS NO DISPUTE THAT THE LAND IN QUESTION CARRI ED THE FEATURES PRESCRIBED IN SECTION 2(14)(III) OF THE ACT, AND, THEREFORE IT QU ALIFIES TO BE AN AGRICULTURAL LAND EXCLUDIBLE FROM THE EXPRESSION CAPITAL ASSET. IN THIS VIEW OF THE MATTER, WE THEREFORE SET-ASIDE THE ORDERS OF THE AUTHORITIES B ELOW AND RESTORE THE RETURN OF INCOME FILED BY THE ASSESSEE QUA THE SURPLUS ON SAL E OF AGRICULTURAL LAND AT VILLAGE DHAMANE. AS A RESULT, THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS ALLOWED. ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 19. NOW, WE MAY TAKE-UP THE GROUND OF APPEAL NO.2 W HICH RELATES TO THE NATURE OF INCOME ARISING ON THE SALE OF PLOT AT KON DHWA. AS PER THE ASSESSEE, THE SURPLUS ON SALE OF TWO PLOTS OF LAND AT KONDHWA IS TO BE ASSESSED AS LONG TERM CAPITAL GAIN AS IT REFLECTED SALE OF A CAPITAL ASSET HELD FOR MORE THAN THREE YEARS. THE ASSESSING OFFICER TREATED THE TRANSACTI ON AS A BUSINESS TRANSACTION SINCE ASSESSEE WAS ENGAGED IN THE BUSIN ESS OF SALE AND PURCHASE OF LAND. THE LONG TERM CAPITAL GAIN WAS DETERMINED AT RS.40,52,52/- IN THE ORIGINAL RETURN OF INCOME WHICH WAS SUBSEQUENTLY RE VISED TO RS.37,85,659/- IN THE REVISED RETURN OF INCOME ON ACCOUNT OF CHANGE I N THE COST OF ACQUISITION. THE ASSESSING OFFICER TREATED THE SALE OF LAND AT K ONDHWA TO BE A BUSINESS TRANSACTION AND TREATED A SUM OF RS.40,11,300/- (DI SREGARDING THE INDEXATION BENEFIT AVAILED BY THE ASSESSEE TO COMPUTE CAPITAL GAINS) AS BUSINESS INCOME. THE CIT(A) HAS ALSO AFFIRMED THE SAID POSITION. 20. ON THIS ASPECT, WE HAVE HEARD THE RIVAL SUBMISS IONS. THE PRIMARY STAND OF THE ASSESSEE IS THAT THE SAID LAND WAS PUR CHASED IN 1998 AND IN ALL THE YEARS IT HAS BEEN SHOWN IN THE BALANCE SHEET AS PERSONAL ASSET, AS A PART OF INVESTMENTS. IT IS SUBMITTED THAT THE LAND S HELD AS STOCK-IN-TRADE ARE SEPARATELY DISCLOSED IN THE BALANCE SHEET AS WELL A S IN PROFIT & LOSS ACCOUNT AS BUSINESS ASSETS AND THAT SUCH POSITION HAS ALS O BEEN ACCEPTED IN THE PAST YEARS EVEN IN SCRUTINY ASSESSMENTS FINALIZED BY THE ASSESSING OFFICER. IT HAS ALSO BEEN CONTENDED THAT THE LAND HAS BEEN HELD FOR A FAIRLY LONG PERIOD OF 9 TO 10 YEARS BEFORE BEING SOLD AND THEREFORE IT COULD N OT BE SAID THAT THE LAND WAS HELD WITH THE OBJECTIVE OF A TRADING ACTIVITY. 21. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE HAS POINTED OUT THAT THE PLEA OF THE ASSESSEE THAT THE LAND AT KONDHWA IS SHOWN AS PERSONAL ASSETS IN THE BOOKS OF ACCOUNT DOES N OT MATCH WITH THE ACTION. THE TREATMENT IN THE BOOKS OF ACCOUNT DOES NOT SHOW THE INTENTION BECAUSE ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 ASSESSEE WAS INDEED DEALING IN PURCHASE AND SALE OF LANDS AND THEREFORE THE SAID TRANSACTION HAS BEEN RIGHTLY ASSESSED AS BUSIN ESS TRANSACTION. 22. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE ASPECT THAT A TAXPAYER CAN HAVE TWO PORTFOLIOS I.E. INVESTMENT PO RTFOLIO COMPRISING OF ASSETS WHICH ARE TO BE TREATED AS CAPITAL ASSETS AND A TRA DING PORTFOLIO COMPRISING OF STOCK-IN-TRADE WHICH ARE TO BE TREATED AS TRADING A SSET HAS ALREADY BEEN NOTED BY US IN THE EARLIER PARAS. THEREFORE, MERELY BECA USE ASSESSEE IS DEALING IN PURCHASE AND SALE OF LAND ALSO CANNOT BE A CONCLUSI VE FACTOR IN HOLDING THAT THE IMPUGNED SALE OF LAND WAS A BUSINESS TRANSACTIO N. WE MAY HASTEN TO ADD HERE THAT THE ONUS UNDER SUCH CIRCUMSTANCE IS ON TH E ASSESSEE TO SHOW THAT THE IMPUGNED TRANSACTION WAS NOT A BUSINESS TRANSAC TION BECAUSE THE ASSESSEE IS OTHERWISE ENGAGED IN THE BUSINESS OF PU RCHASE AND SALE OF LANDS. THUS, THE ISSUE IS WHETHER IN RELATION TO THE SALE OF LAND AT KONDHWA, ASSESSEE HAS DISCHARGED SUCH ONUS. 23. IN THIS CONTEXT, IT IS QUITE CLEAR THAT THE LAN D IN QUESTION HAS BEEN DISCLOSED IN THE ACCOUNT BOOKS AS AN INVESTMENT A ND NOT AS A STOCK-IN-TRADE. SECONDLY, THE LAND HAS BEEN HELD FOR A PERIOD OF 9 TO 10 YEARS BY THE ASSESSEE. THIRDLY, THERE IS NO CHARGE MADE BY THE REVENUE AGAINST THE ASSESSEE THAT ANY STEPS WERE UNDERTAKEN BY THE ASSE SSEE FOR DEVELOPMENT OF THE LAND DURING THE PERIOD IT HAS BEEN HELD BY HIM. CONSIDERING THE AFORESAID THREE FACTORS AND IN THE LIGHT OF THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BAGUIO INVESTMENT PVT. LTD. (S UPRA) THE AFORESAID TRANSACTION OF SALE OF LAND AT KONDHWA IS TO BE TRE ATED AS SALE OF INVESTMENT CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAINS. THEREFORE, WE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICE R TO ASSESS THE INCOME ON SALE OF LAND AT KONDHWA AS SALE OF INVESTMENT CHARG EABLE UNDER THE HEAD CAPITAL GAINS. THUS, ON THIS GROUND ALSO ASSESSEE SUCCEEDS. ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 24. IN THE RESULT, APPEAL IN ITA NO.1299/PN/2012 IN THE CASE OF SHRI KRISHNAKUMAR K. GOYAL IS HEREBY ALLOWED. 25. NOW, WE MAY TAKE-UP THE APPEAL VIDE ITA NO.1300 /PN/2012 IN THE CASE OF SHRI VINIT K. GOYAL WHICH IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DATED 04.04.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 29.12.2010 PAS SED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT PERTAINING TO THE ASS ESSMENT YEAR 2008-09. 26. IN THIS APPEAL, THE GROUND OF APPEAL RAISED BY THE ASSESSEE READ AS UNDER :- 1. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING ASSESSING OFFICERS ACTION OF ASSESSING RS.1,45,33, 815.00 AS BUSINESS INCOME AGAINST APPELLANTS CLAIM OF EXEMPTION BEING SURPLUS ON SALE OF AGRICULTURAL LAND AT DHAMANE AND VILLAGE SANSWADI, WHICH IS HELD BY ASSESSEE AS INVESTMENT AND IS NOT WITHIN DEFINITION OF CAPITAL ASSET. APPELLANT PRAYS FOR EXCLUSION OF THE SAME FROM COMP UTATION OF INCOME. 27. THE AFORESAID GROUND OF APPEAL RELATES TO SURPL US EARNED BY THE ASSESSEE ON SALE OF AGRICULTURAL LANDS AT VILLAGE D HAMANE AND VILLAGE SANSWADI AMOUNTING TO RS.1,45,33,815/-. 28. AT THE TIME OF HEARING, IT WAS A COMMON POINT B ETWEEN THE PARTIES THAT THE FACTS AND CIRCUMSTANCES IN RELATION TO THE SALE OF LAND AT VILLAGE DHAMANE ARE IDENTICAL TO THOSE CONSIDERED BY US IN THE EARL IER PARAGRAPHS BY WAY OF GROUND OF APPEAL NO.1 IN THE CASE OF SHRI KRISHNAKU MAR K. GOYAL. THE PRESENT ASSESSEE IS ONE OF CO-OWNERS OF THE LAND WH ICH WAS PURCHASED AT VILLAGE DHAMANE ALONGWITH SHRI KRISHNAKUMAR K. GOYA L. THEREFORE, OUR DECISION IN GROUND OF APPEAL NO.1 IN THE CASE OF SH RI KRISHNAKUMA K. GOYAL SHALL APPLY MUTATIS-MUTANDIS ON THIS ASPECT ALSO. THEREFORE, THE SURPLUS ON SALE OF AGRICULTURAL LAND AT VILLAGE DHAMANE IS DIR ECTED NOT TO BE TREATED AS BUSINESS INCOME. ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 29. IN SO FAR AS THE SALE OF LAND AT VILLAGE SANSWA DI IS CONCERNED, THE CIT(A) NOTES THAT THE SAID TRANSACTION IS MORE OR L ESS IDENTICAL TO THE TRANSACTION RELATING TO THE LAND AT DHAMANE VILLAGE . CONSIDERING THE AFORESAID FINDING OF THE CIT(A), TO WHICH THERE IS NO CONTROV ERSION BEFORE US, OUR DECISION IN RELATION TO THE LAND AT DHAMANE WOULD APPLY MUTA TIS-MUTANDIS WITH RESPECT TO THE SALE OF LAND AT SANSWADI VILLAGE ALSO. IN V IEW OF THE AFORESAID, WE THEREFORE, ALLOW THE SAID GROUND OF APPEAL RAISED B Y THE ASSESSEE. 30. IN THE RESULT, APPEAL IN ITA NO.1300/PN/2012 IN THE CASE OF SHRI VINIT K. GOYAL IS ALSO HEREBY ALLOWED. 31. RESULTANTLY, BOTH THE APPEALS OF THE ASSESSEE A RE ALLOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH SEPTEMBER, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 15 TH SEPTEMBER, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE