KUMARI ANKITA PRADEEP NAND, Akola V. THE PR. CIT-1, Nagpur

ITA 150/NAG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3156 (ITAT-NAGPUR)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 06-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R MEENA
• Keywords: Capital asset; Business income
• Section: 142(1); 263

Judgement Text

1 ITA NO. 1 50 /NAG/2015. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. ITA NO. 150/NAG/2015 ASSESSMENT YEAR : 2010 - 11. KUMARI ANKITA PRADEEP NAND, THE PR. COMMISSIONER OF INCOME - TAX - 1, AKOLA. VS. NAGPUR. PAN A IGPN2431C APPELLANT. RESPONDENT. APPELLANT BY : SHRI K.P. DEWANI. RESPONDENT BY : SHRI A.R. MEENA. DATE OF HEARING : 0 7 - 12 - 2015. DATE OF PRONOUNCEMENT : 15 TH JAN. , 2016. O R D E R PER SHRI SHAMIN YAHYA, A.M . THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED PRINCIPAL COMMISSIONER OF INCOME - TAX - 1, NAGPUR PASSED U/S 263 OF THE I.T. ACT DATED 16 - 03 - 2015 AND PERTAINS TO ASSESSMENT YEAR 2010 - 11 . 2. IN THIS CASE THE LEARNED CIT NOTED THAT THE ASSESSEE HAS PURCHASED TWO PLOTS OF AGRICULTURAL LAND ON 02 - 06 - 2009 AT THE COST OF RS.12,50,000/ - AND RS.13,50,000/ - RESPECTIVELY. THE SAME WERE SOLD ON 21 - 08 - 2009 AT A SALE PRICE OF RS.72,40,141/ - AND RS.77,0 4,438/ - RESPECTIVELY. LEARNED CIT NOTED THAT THE AO WAS INFORMED DURING THE ASSESSMENT PROCEEDINGS THAT THE LANDS DO NOT COME UNDER THE PURVIEW OF SECTION 2(14)(III) OF THE I.T. ACT. LEARNED CIT FURTHER NOTED THAT THE AO MERELY RELIED UPON THIS SUBMISSION AND DID NOT EXAMINE THE ATTENDED FACTS AND CIRCUMSTANCES, THAT NO ENQUIRY WAS MADE TO VERIFY THE PURPOSE OF THE NATURE OF THE TRANSACTION. LEARNED CIT HELD THAT RECORD SHOWS 2 ITA NO. 1 50 /NAG/2015. THAT IT NEVER OCCURRED TO THE AO THAT THE ABOVE TRANSACTION OF PURCHASE AND SALE OF PROPERTIES CLEARLY POINTED TO THE INTENTION OF THE ASSESSEE TO MAKE QUICK PROFITS AND HAD ALL THE INGREDIENTS IN IT REQUIRED TO INFER THAT IT WAS INDEED AN ADVENTURE IN THE NATURE OF TRADE. THAT THE AO DID NOT CONDUCT ANY ENQUIRIES IN THIS REGARD. LEARN ED CIT FURTHER REJECTED THE ASSESSEES CONTENTION THAT THE ASSESSEE BELONGED TO AN AGRICULTURIST FAMILY AND HAD AGRICULTURAL LANDS IN HER NAME WHEN SHE WAS MINOR. LEARNED CIT FURTHER OBSERVED THAT THE FACT THAT THE ASSESSEE, A LADY OF 19 YEARS OF AGE IS BO RROWING HUGE AMOUNT FROM HER MOTHER TO PURCHASE LAND IN AREA WHERE LAND ALREADY ACQUIRED BY MSETCL AND SELLING THE SAME WITHIN FIVE MONTHS AND EARNING HUGE PROFITS IN THE PROCESS CAN HARDLY BE WISHED AWAY AS A MERE COINCIDENCE. HENCE LEARNED CIT HELD THAT THE AO DID NOT APPLY HIS MIND AND HENCE THE ORDER PASSED WAS CLEARLY ERRONEOUS. LEARNED CIT DIRECTED THE AO TO TREAT THE TRANSACTION AS AN ADVENTURE IN THE NATURE OF TRADE AND COMPUTE THE INCOME ARISING OUT OF THE TRANSACTION AS ASSESSEES BUSINESS INCOME. 3. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE AO HAS DULY MADE THE ENQUIRIES IN THIS REGARD. T HIS IS EVIDENT FROM THE NOTICE ISSU ED U/S 142(1). LEARNED COUNSEL FURTHER REFERRED TO THE ASSESSEES SUBMISSIONS AND RESPONSES SUBMITTED IN THE FORM OF A PAPER BOOK BEFORE US. LEARNED COUNSEL SUBMITTED THAT THE SAID LAND WAS AGRICULTURAL. IT WAS SITUATED BEYOND 20 KMS. O F THE MUNICIPAL LIMI T. THE ASSESSEE HAS BEEN ENGAGING IN AGRICULTURAL ACTIVITY IN THE PAST ALSO. THERE IS NO EVIDENCE THAT THE ASSESSEE HAS BEEN SYSTEMATICALLY AND REGULARLY ENGAGING IN ADVENTURE IN THE NATURE OF T RADE OF AGRICULTURAL LAND. HENCE LEARNED COUNSEL SUBMITTED THA T THE AO HAS DULY MADE THE ENQUIRY AND FORMED AN OPINION . T HAT BY NO STRETCH OF IMAGINATION THE AOS VIEW CAN BE SAID TO BE NOT POSSIBLE OR NOT SUSTAINABLE IN LAW. LEARNED COUNSEL FURTHER REFERRED TO CATENA OF THE CASE LAWS 3 ITA NO. 1 50 /NAG/2015. FOR THE PROPOSITION THAT IF ONE OF THE POSSIBLE VIEWS HAS BEEN ADOPTED BY THE AO, LEARNED CIT CANNOT EXERCISE JURISDICTION U/S 263 BY HOLDING THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. LEARNED COUNSEL FURTHER REFERRED TO SEVERAL CASE LAWS FOR THE PROPOSITION THAT THE TRANSACTION IN AGRICULTURAL LAND CANNOT GIVE RISE TO TAXABLE INCOME. 5. LEARNED D.R., ON THE OTHER HAND, RELIED UPON THE ORDER OF LEARNED CIT. 6. WE FIND THAT IN THIS CASE AS PER NOTICE U/S 142(1) ISSUED BY THE AO THE ASSESSEE WAS DULY ASKED TO SUBMIT THE PURCHASE AND SALE DEEDS OF IMMOVABLE PROPERTIES AND WORKING OF LONG TERM CAPITAL GAIN/SHORT TERM CAPITAL GAIN. IN THE REPLY TO THE SAID NOTICE THE ASSESSEE HAD DULY SUBMITTED THAT PURCHASE AND SALE DEEDS OF THE IMMOVABLE PROPERTIES WERE BEING SUBMITTE D. THAT THERE IS SALE OF RURAL AGRICULTURAL LAND IN THE YEAR UNDER CONSIDERATION. THE SAME IS OUTSIDE THE PURVIEW OF CAPITAL GAIN. FURTHER MORE IN REPLY DATED 25 - 03 - 2013 ENCLOSED IN PAPER BOOK PAGE NO. 9, THE ASSESSEE HAS SUBMITTED TO THE AO AS UNDER : 1. S INCE THE QUESTIONED AGRICULTURAL SITUATED AT YELWAN VILLAGE , TALUKA AND DISTRICT AKOLA, AND AWAY FROM AKOLA MUNICIPAL CORPORATION ABOUT 20 KM., LAND S I TUATED IN AREAS LYING WITHIN A D I STANCE NOT EXCEEDING 8 KMS . FROM THE LOCAL LIMITS OF MUN I CIPALITIE S O R CANTONMENT BOARDS ARE COVERED BY THE AMENDED DEFINITION OF ' CAP I TAL ASSET ' , I F SUCH AREAS ARE, HAVING REGARD TO THE E X TENT OF AND S COPE FOR THE I R URBANIZATION AND OTHER RELEVANT CONSIDERATIONS, IS NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF . CEN TRAL GOVERNMENT IN ITS NOTIFICATION NO . 11186 DATED 28 - 12 - 1999 CLEARLY CLAR I FIES THAT AGRICULTURAL LAND SITUATED IN RURAL AREAS, AREAS OUTSIDE THE MUNICIPALITY OR CANTONMENT BOARD ETC., HAVING A POPULATION OF NOT LES S THAN 10 , 000 AND ALSO BEYOND THE DI STANCE NOTIFIED BY CENTRAL GOVERNMENT FROM LOCAL L I MITS , I . E . THE OUTER LIMITS OF ANY SUCH MUNICIPALITY OR CANTONMENT BOARD ETC . , STILL CONTINUES TO BE EXCLUDED FROM THE DEFINITION OF 'CAPITAL ASSET ' . ACCORD I NGLY, IN VIEW OF SUB - CLAUSE (B) OF SECTION 2(1 4)( III ) EVEN UNDER THE AMENDED DEFINITION OF EXPRESSION 'C AP I TAL ASSET ', THE AG R ICULTURAL AND SITUATED IN RURAL AREAS CONTINUES TO BE EXCLUDED FROM THAT DEF I NITION . IN THE INSTANT CASE, ADMITTEDLY, THE AGRICULTURAL LAND OF THE ASSESSEE WAS OUTSIDE THE MUNICIPAL LIMITS AND THAT ALSO ABOUT 20 KM . AWAY FROM THE OUTER LIMITS OF THE SAID MUNICIPALITY, ASSESSEE'S LAND DID NOT COME WITHIN THE PURVIEW OF SECTION 2(14)(III ) EITHER UNDER SUB - CLA USE (A) OR (B ) , HENCE THE SAME COULD NOT BE CONSIDERED AS CAPITAL ASSET W I THIN THE MEANING OF THIS SECTION . HENCE, NO CAPITAL GAIN TA X COULD BE CHARGED ON THE SALE TRANSACTION OF THIS LAND ENTERED BY THE ASSESSEE . THE ABOVE ENQUIRY MADE BY THE AO AND THE ASSESSEES SUBMISSIONS MAKE IT 4 ITA NO. 1 50 /NAG/2015. CLEAR THAT THE LEARNED CIT HAS TOTALLY ERRED IN HOLDING THAT THE AO HAS NOT MADE ANY ENQUIRY IN THIS REGARD. THE AO HAS DULY MADE ENQUIRIES AND THE ASSESSEE HAS GIVEN THE DUE EXPLANATION. THE ASSESSEE HAS EXPLAINED THAT THE CONCERNED LAND IS SITUATED 20 KMS. A WAY FROM THE MUNICIPAL AREA AND HENCE IT DOES NOT FALL UNDER T HE DEFINITION OF CAPITAL ASSET. THE ASSESSEE HAS DULY SUBMITTED THE PURCHASE AND SALE DEEDS OF THE LAND. IN THE SAID DEED S THEY WERE DULY REFLECTED AS AGRICULTURAL LAND. IT IS NOT THE CASE THAT THE ASSESSEE HAS INDULGED IN PURCHASE AND SALE OF LANDS, AGRI CULTURAL OR OTHERWISE OTHER THAN THE ONE MENTIONED IN THE ASSESSMENT ORDER. IN THESE CIRCUMSTANCES IN OUR CONSIDERED OPINION IT CANNOT BE SAID THAT THE AO HAS NOT MADE PROPER ENQUIRY. MOREOVER THE VIEW FORMED BY THE AO AS A CONSEQUENCE OF THE ABOVE SAID EN QUIRY AND REPLY CANNOT BE SAID TO BE NOT POSSIBLE VIEW. NOW IT IS SETTLED THAT IF THE AO ADOPTS ONE OF THE POSSIBLE VIEWS, LEARNED CIT CANNOT HOLD THE ORDER OF THE AO AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE MERELY BECAUSE THE LEARNED C IT DOES NOT AGREE WITH THE ABOVE SAID VIEW. THIS PROPOSITION IS DULY SUPPORTED BY HONBLE APEX COURT DECISION IN THE CASE OF CIT VS. MAX INDIA LTD. 295 ITR 282. AS REGARDS THE MERITS OF THE CASE, WE FIND THE FOLLOWING WHICH SUPPORTS THE CASE OF THE ASSESS EE: I) THE ASSESSEE HAS AGRICULTURAL LAND. THIS IS NOT DISPUTED AND DULY REFLECTED BY THE PURCHASE DEEDS. II) AGRICULTURAL LANDS ACQUIRED BY THE ASSESSEE HAVE NOT BEEN CONVERTED OR TO BE USED OTHER THAN AGRICULTURAL PURPOSES. III) THE LANDS ARE LOCATED 20 KMS. AWAY F ROM THE MUNICIPAL LIMITS. IV) AS PER THE EXTRACT OF FORM NO. 7/12 FOR EARLIER YEARS THE ASSESSEE HAS BEEN ENGAGING IN AGRICULTURAL ACTIVITIES. 7. THUS IT IS AMPLY CLEAR THAT THE AO WAS QUITE JUSTIFIED IN TAKING A VIEW THAT THE ASSESSEES CASE WAS THAT OF PURCHASE AND SALE OF AGRICULTURAL LAND AND THE SURPLUS THEREON WAS DULY EXEMPT. IN THIS REGARD WE MAY GAINFULLY REFER TO HONBLE BOMBAY HIGH COURT NAGPUR BENCH ORDER IN INCOME TAX APPEAL NO. 5 ITA NO. 1 50 /NAG/2015. 120 OF 2013 IN THE CASE OF NITISH RAMESHCHANDRA CHORDIA VIDE ORDER DATED 30 - 03 - 2015 IN A BATCH OF APPEALS RELATING TO SALE OF LAND. IN THIS CASE HONBLE BOMBAY HIGH COURT HAD ALSO REFERRED TO HONBLE DELHI HIGH COURT DECISION IN THE CASE OF DLF UNITED LTD. V/S. CIT AND NOTED THAT HONBLE APEX COURT HAD ALSO DISMISSED THE SLP BY THE DEPARTMENT AGAINST THE HONBLE DELHI HIGH COURT ORDER. WE MAY REFER TO PARA NO. 12 TO 14 OF THE ABOVE REFERRED ORDER OF THE HONBLE J URISDICTIONAL HIGH COURT AS UNDER : 12. WE HAVE CAREFULLY CONSIDERED AND APPLIED OUR MIND TO THE RIVAL SUBMISSIONS AND THE RULINGS CITED AT THE BAR. WE AGREE WITH THE SUBMISSION THAT THE AMENDMENTS IN THE TAXING STATUTE, UNLESS A DIFFERENT LEGISLATIVE INTENTION IS CLEARLY EXPRESSED, SHALL OPERATE PROSPECTIVELY. IN OUR VIEW, IF THE ASSESSEE HAS EARNED BUSINESS INCOME AND NOT THE AGRICULTURAL INCOME, SECTION 11 OF THE GENERAL CLAUSES ACT WILL PREVAIL UNLESS A DIFFERENT INTENTION APPEARS TO THE CONTRARY. THE IMPUGNED ORDER APPEARS WELL REASONED IN THE FACTS AND CIRCUMSTANCES TO CLEARLY INDICATE THAT ANY CONSIDERATION RECEIVED OUT OF SALE OF THE AGRICULTURAL LAND CANNOT BE TREATED AS BUSINESS INCOME FOR THE PURPOSE OF INCOME TAX. THE DISTANCE BETWEEN THE MUNICIPAL LIMITS AND ASSESSED PROPERTY/ASSET IS TO BE MEASURED HAVING REGARD TO THE SHORTEST ROAD DISTANCE AND NOT AS PER THE CROWS FLIES I.E. A STRAIGHT LINE DISTANCE AS CANVASSED BY THE REVENUE. THE LEARNED COUNSEL FOR THE RESPONDENT HAS CONTENDED IN THIS REGARD THAT THE DECISION HAS BEEN RENDERED BY THE MUMBAI BENCH IN THE CASE OF LAUKIK DEVELOPERS (SUPRA) IN THE CONTEXT OF THE PROVISIONS OF SECTION 80IB(10) AND NOT IN CONNECTION WITH THE ISSUE OF DETERMINING A CAPITAL ASSET WITHIN THE MEANING OF S ECTION 2(14). IT IS NOT IN DISPUTE THAT THE VIEW TAKEN IN THE CASE OF LAUKIK DEVELOPERS (SUPRA) WAS NOT CHALLENGED BY THE REVENUE. 13. IN THE RULING IN THE CASE OF DLF UNITED LTD. V/S. COMMISSIONER OF INCOME TAX, (1995) 129 CTR (DEL) 33 , THE HONBLE DELHI HIGH COURT REFERRED TO EXPLANATION 2(1)(A) RELIED UPON BY THE COUNSEL FOR THE REVENUE AND HELD THAT SURPLUS OF THE COMPENSATION AMOUNT ARISING AS A RESULT OF ACQUISITION OF AGRICULTURAL LAND IN QUESTION WAS CAPITAL ASSET AND NOT THE INCOME AT ALL. THE QU ESTION OF CHANGE IN THE DEFINITION OF AGRICULTURAL INCOME BECAUSE OF INSERTION OF THE EXPLANATION HAS NO RELEVANCE. THUS, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHEN M/S DLF UNITED LTD. WAS CARRYING ON BUSINESS AS COLONIZERS BY PURCHASE, DEVELOPMENT A ND SELLING THE PLOTS OF LANDS IN AND AROUND DELHI IN THE COURSE OF ITS BUSINESS AND THE COMPANY HAD ACQUIRED CERTAIN AGRICULTURAL 6 ITA NO. 1 50 /NAG/2015. LAND IN CERTAIN VILLAGES AROUND DELHI, OUT OF WHICH SOME LAND WAS ACQUIRED BY THE GOVERNMENT THROUGH A NOTIFICATION ISSUED U /S. 4 OF THE LAND ACQUISITION ACT FOLLOWED BY DECLARATION ISSUED UNDER SECTION 6 OF THE LAND ACQUISITION ACT AND THE COMPANY RECEIVED COMPENSATION FOR THE LAND AFTER ASSESSMENT UNDER THE LAND ACQUISITION ACT, THE INCOME TAX OFFICER, WHILE ASSESSING THAT TH E COMPANY WAS A DEALER IN LANDS, HAD HELD THAT THE ACQUIRED LAND CONSTITUTED THE COMPANYS STOCK - IN - TRADE AND COMPENSATION RECEIVED BY THE COMPANY WAS LIABLE TO BE TAXED AS AN INCOME IN THREE ASSESSMENT YEARS UNDER CONSIDERATION. THE QUESTION WHICH WAS RA ISED WAS ANSWERED BY THE DELHI HIGH COURT IN PARAGRAPH 9 OF THE RULING UNDER CONSIDERATION, WHICH READS THUS: THIS COURT, FURTHER HELD THAT IN OTHER WORDS THE AGRICULTURAL LANDS PURCHASED ORIGINALLY BY THE ASSESSEE FOR URBANIZATION OR CONVERSION INTO BU ILDING PLOTS REMAINED AGRICULTURAL LAND TILL THE ACQUISITION AND PAYMENT OF COMPENSATION, AND IN VIEW OF THE SAID FINDING THIS COURT HELD THAT THE FIRST QUESTION HAS TO BE ANSWERED IN THE NEGATIVE, I.E. THE PROFITS WERE NOT BUSINESS PROFITS. WITH REGARD TO THE SECOND QUESTION THIS COURT FOUND THAT AS THE COMPENSATION HAD BEEN PAID FOR THE ACQUISITION OF AGRICULTURAL LAND, THE QUESTION REALLY INVOLVED A DETERMINATION AS TO WHETHER THE PRICE PAID FOR THE LAND BY WAY OF COMPENSATION COULD BE INCLUDED WITHIN T HE DEFINITION OF AGRICULTURAL INCOME. IT WAS FURTHER HELD THAT AGRICULTURAL LAND WAS EXCLUDED FROM THE DEFINITION OF CAPITAL ASSET OCCURRING IN S. 2(14)(III) AND ACCORDINGLY ANY GAIN RESULTING FROM THE ACQUISITION OF AGRICULTURAL LAND WAS NOT INCOME, AN D ACCORDINGLY THE ANSWER TO THE SAID QUESTION WAS THAT THE COMPENSATION AMOUNT WAS NOT INCOME. 14. THUS, THE INCOME OUT OF TRANSACTIONS OF IMMOVABLE PROPERTY IN THE NATURE OF AGRICULTURAL LAND IS HELD AS CAPITAL GAIN EXEMPTED UNDER THE INCOME TAX AS ARISI NG FROM THE AGRICULTURAL LAND. WE FIND THE RULING IN THE CASE OF DLF UNITED LTD. WAS CHALLENGED IN S.L.P. (CIVIL) NO. CC 1727 - 1729/98 AND THE HONBLE APEX COURT FOUND THAT THERE WAS NO MERIT IN THE S.L.P. AND IT WAS ACCORDINGLY DISMISSED ON MERITS. THUS, CAPITAL GAIN ARISING FROM THE TRANSACTION IN RESPECT OF AGRICULTURAL LAND CANNOT BE CONSIDERED AS BUSINESS INCOME. THE RULING IS SQUARELY APPLICABLE TO THE FACTS AND CIRCUMSTANCES UNDER OUR CONSIDERATION IN THE PRESENT CASE AS WELL. 8. IN THE LIGHT OF TH E ABOVE DISCUSSION AND EXPOSITION FROM THE HONBLE JURISDICTIONAL HIGH COURT, WE FIND THAT THE VIEW ADOPTED BY THE AO IS SUSTAINABLE IN LAW. HENCE LEARNED CIT IS NOT CORRECT IN HOLDING THAT THE ORDER OF 7 ITA NO. 1 50 /NAG/2015. THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST O F THE REVENUE. HENCE WE HOLD THAT THE JURISDICTION ASSUMED BY THE LEARNED CIT CANNOT BE SUSTAINED. ACCORDINGLY, WE QUASH THE SAME. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF JAN., 2016. SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 15 TH JANUARY, 2016. COPY FORWARDED TO : 1. KUMARI ANKITA PRADEEP NAND, NAND CHAMBERS, CONVENT ROAD, AKOLA. 2. I.T.O., WARD - 2, AKOLA. . 3. PRINCIPAL COMMISSIONER OF INCOME - TAX - 1, NAGPUR. 4. D.R., ITAT, NAGPUR. 5. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE.