A.C.I.T.. Cir.-1, Nagpur V. SHRI SATISH MUNDE, Nagpur

ITA 156/NAG/2015

• Counselvise Citation: [2014] 117 COUNSELVISE.COM (IT) 8873 (ITAT-NAGPUR)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 23-10-2014
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 29-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2015
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Earning of tax free income; Cost of acquisition; Set aside
• Section: 143(3); 50C; 2(14); 143(1); 131; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.156/NAG./2015 ( ASSESSMENT YEAR : 2010 11 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 1, MECL BUILDING SEMINARY HILLS, NAGPUR 440 006 . APPELLANT V/S SHRI SATISH K. MUNDE 22 B, GULAB PALACE RAMDASPETH, NAGPUR 440 025 PAN ACUPM6198B . RESPONDENT REVENUE BY : SHRI A.R. NINAWE ASSESSEE BY : SHRI K.P. DEWANI DATE OF HEARING 29.03.2017 DATE OF ORDER O R D E R PER RAM LAL NEGI, J.M. THE AFORESAID APPEAL AT THE INSTANCE OF THE REVENUE IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 23 RD FEBRUARY 2015, PASSED BY THE LEARNED COMMISSIONER (APPEALS) I, NAGPUR, FOR THE ASSESSMENT YEAR 2010 11. 2. THE GROUNDS RAISED BY THE REVENUE ARE REPRODUCED BELOW: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN NOT UPHOLDING THE DECISION OF THE ASSESSING OFFICER TO TREAT THE SURPLUS ARISING OUT 2 SHRI SATISH K. MUNDE OF THE SALE OF GARKHEDA LAND AND KHASAR M ARI LANDS BEING SR. NOS. 22 AND 30 AS BUSINESS INCOME OF THE ASSESSEE. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED AS ABOVE BY DISREGARDING THE ELABORATE FINDINGS GIVEN BY THE ASSESSING OFFICER AS REGARDS THE PERIOD OF LAND HOLDING, THE FREQUENCY OF TRANSACTIONS, THE AMOUNTS OF INVESTMENTS, THE CONDITIONS ATTACHED WITH THE PURCHASE AND SALE OF LANDS, THE ASSESSEE BEING ENGAGED IN THE BUSINESS OF LAND DEVELOPMENT AND THE SALE OF LAND AFTER CONVERTING IT TO NON AGRICULTURAL LAND, THEREBY T REATING THE TRANSACTIONS AS BUSINESS INCOME. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN TREATING THE TRANSACTION OF SALE OF GHARKHEDA LAND AS THE TRANSACTION TAXABLE AS LONG TERM CAPITAL GAIN AS A GAINST BUSINESS INCOME HELD BY THE ASSESSING OFFICER. (IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN TREATING THE TRANSACTION OF SALE OF 0.9 HECTARES OF LAND AT SR. NO. 22, KHASARN - IARI AS A TRANSACTIO N ASSESSABLE AS SHORT TERM CAPITAL GAINS AS AGAINST BUSINESS INCOME HELD BY THE ASSESSING OFFICER. (V) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN TREATING THE TRANSACTION OF SALE OF 0.87 HECTARES OF LAND AT SR. NO. 22, KHASARMARI BEING EXEMPT U/S 10(1) AS AGAINST BUSINESS INCOME HELD BY THE ASSESSING OFFICER. (VI) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CJT(APPEALS) HAS ERRED IN TREATING THE TRANSACTION OF SALE OF 0.9 HE CTARES OF LAND AT SR. NO. 30, KHASARMARI AS EXEMPT U/S 10(1) AS AGAINST BUSINESS INCOME HELD BY THE ASSESSING OFFICER. 2 . BRIEF FACTS ARE, THE ASSESSEE IS AN AGRICULTURISTS AND IS ENGAGED IN AGRICULTURAL ACTIVITY FOR MORE THAN A DECADE. THE ASSESSEE FILED HIS RETURN OF INCOME ON 23 RD MARCH 2011, DECLARING TOTAL INCOME OF ` 57,99,160 , WHEREAS, T HE ASSESSING OFFICER DETERMINED THE INCOME AT ` 7,54,47,000. THE ADDITION BY TREATING SURPLUS ON SALE OF AGRICULTURAL LANDS AND OTHER LAND AS BUSINESS INCOME ARE SHOWN AS UNDER: 3 SHRI SATISH K. MUNDE KHASARMARI S.NO.30 (AGRICULTURAL LAND) ` 97,44,550 KHASARMARI S.NO.22 (AGRICULTURAL LAND) ` (21,36,800) GHARKHEDA LAND (NON AGRICULTURAL LAND) ` 1,52,95,250 THE OBSERVATIONS OF THE ASSESSING OFFICER ARE AS UNDER: 4. DURING THE YEAR, THE ASSESSEE HAS ENTERED INTO NUMBER OF LAND TRANSACTIONS. HE HAS PURCHASED TOTAL 7 LANDS WORTH RS. 2,56,83,870/ - AND SOLD TOTAL 5 LANDS WORTH RS. 6,93,62,000/ - (DETAILS GIVEN IN TABLE NO.1 PARA 4.4). THESE LANDS ARE AT 8 DIFFERENT VILLAGES/ CITIES. THE ANALYSIS OF FOLLOWING THREE SALE TRANSACTIONS ENTERED INTO BY THE ASSESSEE IS GIVEN IN THE FOLLOWING PARAS. I . LAND AT SR.NO.30, KHASARMARI II . LAND AT SR.NO.22, KHASARMARI III . LAND AT GARKHEDA , AURANGABAD THE GAIN ON SALE OF LAND AT S.NO.I W AS CLAIMED AS EXEMPT U/S 2(14). THE SALE TRANSACTION AT S.NO. II WAS NOT ALL REPORTED IN THE RETURN OF INCOME. THE GAIN ON SALE OF LAND AT S.NO. III WAS OFFERED TO TAX AS LONG TERM CAPITAL GAINS. THE ASSESSEE DURING THE , PROCEEDINGS HAD ALL THROUGHOUT MAINTAINED THAT THE LANDS WERE PURCHASED WITH THE INTENTION OF DOING AGRICULTURE. ON DEEPER VERIFICATION AND TAKING INTO CONSIDERATION RELEVANT FACTORS A COMPLETELY DIFFERENT PICTURE EMERGES. 4.1 SALE OF LAND AT SR.NO.30, K HASARMARI: THE ASSESSEE HAS SOLD THE LAND AT SURVEY NO.3 0 AT VILLAGE KHASARMARI TO M/S. VATSALYA REALITIES (P) LTD. FOR TOTAL SALE CONSIDERATION OF RS. 2,26,00,000/ - VIDE SALE DEED DATED 02.02.2010. THIS LAND WAS PURCHASED BY THE ASSESSEE ON 04.06.2009 F ROM ONE SHRI NILKANTH KORAM AT RS. 1,21,90,5000/ - , FROM THE READING OF THE SALE DEED IT IS NOTICED THAT A SPECIAL PERMISSION WAS SOUGHT FROM THE GOVERNMENT OF MAHARASHTRA FOR SALE OF THIS LAND. AS PER THE MAHARASHTRA LAND REVENUE CODE, 1966 WHENEVER A LAND IS SOLD BY AN 7 4 SHRI SATISH K. MUNDE ADVIVASI(TRIBAL) LANDOWNER ( IN THIS CASE SHRI NILKANTH KORAM ) TO A NON - ADIWASI (THE ASSESSEE), IT REQUIRES SPECIAL PERMISSION FROM GOVERNMENT OF MAHARASHTRA. A LETTER ADDRESSED TO BDO, NAGPUR BY ADDITIONAL DISTRICT MAGISTRATE, NAGPUR IS AL SO ON RECORD (AT ANNEXURE - 1). AS PER THIS LETTER, PERMISSION HAS BEEN GRANTED UNDER MAHARASHTRA LAND REVENUE ACT, 1966 FOR SALE OF LAND AT KHASARMARI BELONGING TO ADLIWASI OWNER - SHRI NILKANTH KORAM TO THE ASSESSEE. THE LETTER ALSO CATEGORICALLY MENTIONS THAT THE SALE OF LAND IS ONLY FOR NON - AGRICULTURAL PURPOSE. FURTHER, THE LETTER ALSO GIVES 14 CONDITIONS TO BE FULFILLED BY THE TRANSACTING PARTIES. AT POINT NO. 6 IS CONDITION WHICH STATES THAT 6 . THE SAID LARJ SHOUID BE U.SE1 FOR ONL Y FOR THAT NON - AGRICUL TURAL PURPOSE FOR WHICH IT HAS EN BOUGHT.' FURTHER POINT 8 STATES THAT '8. IT SHALL BE BINDING (ON THE SELLER) TO USE THE SAID LAND WITHIN 3 YEARS ONLY FOR THAT NON - . AGRICULTURAL PURPOSE FOR WHICH IT HAS BEEN PERMITTED.' 4.1.1. THUS, FROM THE ABOVE, IT IS CLEAR THAT THE LAND WAS PURCHASED FOR NON AGRICULTURAL PURPOSE. IT COULD BE USED ONLY FOR NON - AGRICULTURAL PURPOSE ONLY. IT IS TO BE NOTED THAT THE ASSESSEE HAS SOLD THE LAND TO BUILDER - . VATSALYA REALITIES ON WHICH NOW STANDS A HOUSING PROJECT. FURTHER THE PERIOD OF HOLDING OF LAND IS ALSO VERY SMALL, ONLY FEW MONTHS I.E. 8 MONTHS. HENCE, THE CLAIM OF THE ASSESSEE THAT THE SAID LAND WAS AGRICULTURAL AND GAIN ON SALE IS EXEMPT U/S. 2(14) IS NOT TENABLE. FURTHER, IT IS A WELL KNO WN FACT THAT RAPID URBANIZATION HAS RAISED THE PRICE OF LAND IN AND AROUND NAGPUR AND PARTICULARLY ON THE WARDHA ROAD. AS MENTIONED IN THE PARA 3.2, THE ASSESSEE HIMSELF HAS FORMULATED A FARM HOUSE PROJECT - MACAU GREENS AT DONGARGAON. THE MACAU GREENS SCHE ME IS DISCUSSED IN DETAIL IS PARA 4.5. 4.1.2. HENCE, IT WAS AMPLY CLEAR THAT LAND WAS PURCHASED WITH A VIEW TO CASH IN ON THE RISING PRICES OF LAND IN THE AREAS. HENCE, ASSESSEE WAS ASKED TO EXPLAIN WHY THE GAIN ON SALE OF LAND SHOULD NOT BE TAXED U/S. 28 . THE LD. COUNSEL FOR THE ASSESSEE PUT FORTH FOLLOWING ARGUMENT IN DEFENCE OF ITS POSITION. I . LAND WAS PURCHASED ONLY FOR THE PURPOSE OF AGRICULTURE. II . IT HAD BEEN CARRYING OUT AGRICULTURE ON THE LAND AS 7/12 EXTRACT SUGGESTS. 5 SHRI SATISH K. MUNDE III . ASSESSEE PURCHASED AN AGRICULTURAL LAND AND SOLD AN AGRICULTURAL LAND. IT WAS THE SECOND PURCHASES OF LAND - VATSALYA REALITIES WHO APPLIED FOR N.A. (NON' AGRICULTURE) ORDER. IV . HENCE, FOR ALL PURPOSES LAND PURCHASED WAS AGRICULTURAL AND THE LAND SOLD TOO WAS , AGRICULTURAL. 4.1.3 I HAVE GIVEN DUE CONSIDERATION TO THE SUBMISSIONS OF THE ASSESSEE, HOWEVER, SAME IS NOT ACCEPTABLE IN LIGHT OF THE CASE AND PREVAILING LEGAL PRECEDENTS. FIRST OF ALL, THE P E RMISSION TO SELL THE LAND WAS GIVEN ON THE CONDITION THAT IT WOULD BE USED FOR NON - AGRICULTURAL PURPOSE. THE ASSESSEE WAS WELL AWARE OF THIS. THE COPY OF THE LETTER ADDRESSED TO THE BDO BY THE ADDITIONAL DISTRICT MAGISTRATE REGARDING THE PERMISSION TO SALE OF LAND WAS ALSO MARKED TO HIM. IN THE STATEMENT U/S 131 RECORDED ON 14.12 .2013 ACCEPTED THAT HE HAD RECEIVED THE COPY OF THIS LETTER. THUS, IT IS QUITE CLEAR THAT HE WAS WELL AWARE OF THE FACT THAT THE LAND WAS TO BE USED ONLY FOR NON - AGRICULTURAL PURPOSE. FURTHER, IF THE INTENTION OF THE ASSESSEE WAS IN FACT TO CARRY OUT AGRIC ULTURE, THERE IS NO REASON WHY HE HAD SOLD THE LAND IN 8 MONTHS WITHOUT KEEPING IT FOR EVEN A SINGLE AGRICULTURAL YEAR. IN FACT, IT WOULD BE PERTINENT HERE TO QUOTE A PARA FROM THE SALE DEED OF LAND. AS PER THIS PARA THE SELLER (NILKANTH KORAM) HAS SOLD TH IS LAND AS IT NOT FIT FOR CULTIVATION. THE RELEVANT PARA IS LOOSELY TRANSLATED FROM MARATHI. 'I AM EXECUTING THIS SALE DEED WITH NON - ADIWASI BUYER SHRI SATISH MUNDE FOR THE SALE OF THIS LAND AS IT IS UNCULTIVABLE, BARREN & ROCKY AND BECAUSE OF FINANCIAL R EASONS & IT IS BECAUSE THE PRICE IS RIGHT.' 4 . 1. 4 THUS, IT IS VERY CLEAR THAT THE LAND ITSELF WAS NOT VERY FERTILE. INVESTING MORE THAN RS. 1 CRORE IS SUCH A LAND IS CLEARLY NOT A FEASIBLE OPTION FOR AN AGRICULTURALIST. HOWEVER, AS A PIECE OF VALUABLE REAL ESTATE THIS LAND WAS GREAT OPPORTUNITY WHICH ASS ESSEE CASHED ON. INFACT, FROM THE VERY BEGINNING, THE INTENTION OF THE ASSESSEE WAS TO BUY THIS LAND AND THEN SELL IT FOR A RIGHT PRICE AND MAKE QUICK PROFITS. 4.2 SALE OF LAND AT SR.NO.30, KHASARMARI. FURTHER, DURING THE PROCEEDINGS IT WAS REVEALED THAT ASSESSEE HAS SOLD ANOTHER LAND AT SURVEY NO.22 AT KHASARMARI. THIS TRANSACTION WAS NOT AT ALL SHOWN IN THE RETURN /COMPUTATION OF THE ASSESSEE. THE ASSESSEE WAS ASKED TO EXPLAIN THE REASON FOR NOT DECLARING THIS SALE OF LAND IN THE RETURN. THE ASSESSEE RE PLIED THAT THE LAND WAS AGRICULTURAL LAND. FURTHER, THERE WAS 6 SHRI SATISH K. MUNDE LOSS IN THE TRANSACTION AS LAND WAS PURCHASED FOR RS.66,56,800 AND SOLD FOR RS.45,20,000/ . SINCE THERE WAS NO EFFECT ON THE TAX LIABILITY OF THE ASSESSEE, THE TRANSACTION WAS NOT REFLECTED IN T HE RETURN OF INCOME. 4.2.1. THIS CONTENTION OF THE ASSESSEE IS NOT AT ALL ACCEPTABLE. LET US LOOK AT THE FACTS. THIS AGRICULTURAL LAND WAS PURCHASED ON 03/07/2007 FROM A GROUP OF TRIBAL LANDOWNERS. ONCE AGAIN THE SPECIAL PERMISSION TO PURCHASE THE LAND WAS GIVEN ON THE CONDITION THAT IT SHOULD BE USED FOR NON - AGRICULTURAL PURPOSE. IT WAS SOLD IN TO TWO PARTS. I ) 0.9 HECTARE LAND TO RAI GROUP DELHI. SALE CONSIDERATION RECEIVED RS. 28,00,000/ - STAMP DUTY VALUATION - RS. 63,00,000/ - II ) 0.87 HECTARE OF LAND TO WIFE, SMT. VANMALA MUNDE AND SHRI KISAN YADAV SALE CONSIDERATION RECEIVED RS. 1720000/ - STAMP DUTY VALUATION - RS. 1701000/ - 4.2.2 FROM THE PERUSAL OF SALE DEED OF LAND SOLD TO RAI GROUP, IT IS SEEN THAT THE LAND WAS A NON - AGRICULTURAL LAND (AKRISHAK). HENCE, IT WOULD CONSTITUTE A CAPITAL ASSET AND WOULD ATTRACT PROVISIONS OF SECTION 50C OF THE INCOME TAX ACT, 1961. THE DEEMED SALE CONSIDERATION WOULD BE RS. 63,00,000/ - AND RESULTANT SHORT - TERM GAIN WOULD BE RS. 35,00,000/ - . THUS, CONTENTION OF THE ASSESSEE THAT IT WAS AGRICULTURAL LAND AND WOULD HAVE NO EFFECT OF TAXABILITY IS FALSE. 4.2.3 AS FAR AS THE SECOND PIECE OF LAND SOLD TO WIFE OF THE ASSESSEE SMT. VANMALA MUNDE AND SHRI KISHAN YADAV, IT IS NOT CLEAR FROM THE SALE DEED WHETHER THE LAND WAS CONVERTED INTO NON - AGRICULTURAL LAND OR NOT. HOWEVER, THE 7/12 EXTRACT OF THE WHOLE 1.71 HECT. OF LAND AT THE TIME OF PURCHASE CLEARLY SHOWS THAT THERE WAS NO AGRICULTURAL ACTIVITY CARRIED ON THE LAND AND THE LAND WAS MARKED AS 'PADIT' (BARREN/ FA LLOW). EVEN, THE 7/12 EXTRACT IN THE NAME OF THE ASSESSEE FOR. F.Y 2007 - 08 SHOWS THE LAND AS BARREN/FALLOW. AS ALREADY MENTIONED THIS LAND WAS ALSO PURCHASED FROM A GROUP OF TRIBAL OWNERS AND THE SALE WAS ALLOWED BY THE STATE GOVERNMENT ONLY ON THE CONDITI ON THAT THE LAND WILL BE USED FOR NON AGRICULTURAL FOR NON AGRICULTURAL PURPOSE. THUS, IT IS CLEAR THAT THE ASSESSEE BROUGHT THE LAND WITH THE INTENTION TO SALE IT AND NOT TO RETAIN IT FOR CULTIVATION. 4.3 SALE OF GARKHEDA LAND : 7 SHRI SATISH K. MUNDE LET US LOOK AT THIRD SALE TRANSACTION OF THE ASSESSEE DURING THE YEAR. IT IS AT GARKHEDA, AURANGABAD WHICH IS OUTSIDE THE USUAL AREA OF OPERATION OF THE ASSESSEE BUT OVERALL CONDUCT OF AFFAIRS IS SUCH THAT INFERENCES DRAWN ARE SIMILAR. THE ASSESSEE HAS SOLD A PLOT AT GARKHEDA, AURANGABAD (MAHARASHTRA) TO M/S. MANIK HOSPITAL AND RESEARCH CENTRE (F) LTD. FOR SALE CONSIDERATION OF P.S. 4,01,60,000/ - . THE ASSESSEE HAD PURCHASED THE LAND ON 24 TH APRIL 2006 FOR RS. 2,48,64,750/ - AND OFFERED THE LONG TERM CAPITAL GAIN OF RS.47,89,703/ - TO TAX AFTER CLAIMING INDEXATION. 4.3.1. PRIMA FACIE AND IN ISOLATION THE CLAIM OF LONG TERM CAPITAL GAIN MADE BY THE ASSESSEE SEEMS TO BE IN ORDER AS THE LAND HAS BEEN HELD BY THE ASSESSEE FOR LITTLE OVER, THREE YEARS. BUT TAKING INTO CONSIDERATION THE SERIES OF EVENTS AND OVERALL CONDUCT OF THE ASSESSEE A DIFFERENT PICTURE EMERGES. THE SAID LAND WAS BOUGHT BY THE ASSESSEE VIDE SALE DEED DATED 24 TH APRIL 2006 FROM PAWAR FAMILY, GARKHEDA. THE LAND WAS AGRICULTURAL LAND THOUGH AS PER THE 7/12 EXTRACT IT W AS 'PADIT' (FALLOW). THEREAFTER, THE ASSESSEE WITHIN 4 MONTHS ON 05/08/2006, MADE AN APPLICATION FOR CONVERSION OF THE LAND INTO NON - AGRICULTURAL LAND (NA) FOR RESIDENTIAL PURPOSE. THE PERMISSION WAS GRANTED VIDE ORDER OF DM, AURANGABAD DATED 28/12/2006. ( COPY AT ANNEXURE - 2 WHICH ALSO GIVES DATE OF APPLICATION) . 4.3.2. DURING THE STATEMENT RECORDED OF THE ASSESSEE U/S 131 DATED 14/12/2012, THE ASSESSEE WAS ASKED VIDE Q . NO. 13, THE PURPOSE FOR PURCHASE OF THE LAND. THE ASSESSEE ANSWERED THAT THE LAND WAS P URCHASED FOR AGRICULTURAL PURPP. THE RELEVANT PORTION IS REPRODUCED BEFORE 'Q 13. YOU HAVE SOLD THE LAND AT GARKHEDA DURING THE YEAR. PLEASE EXPLAIN THE PURPOSE OF THE PURCHASE OF ABOVE LAND AND THE CONDITION OF THE LAND . ANS. I HAVE PURCHASED THE LAND AT GARKHEDA FOR AGRICULTURE PURPOSE. THE LAND WAS UNEVEN AND HAD A SMALL NULLAH RUNNING THROUGH THE LAND' THE CONDUCT OF THE ASSESSEE HOWEVER, IS QUITE OPPOSITE. WITHIN 4 MONTHS AN - ON WAS MADE FOR CONVERSION OF LAND INTO NA. THE PERUSAL OF THE SALE DEED WITH M / S. MANIK HOSPITAL AND R ESEARCH CENTRE (P) LTD. SHOWS THAT THE ASSESSEE RECEIVED MORE THAN 50% OF THE SALE CONSIDERATION ( RS. L,40,00,000/ - ) IN MAY 2008 ITSELF. THUS, IT IS CLEAR THAT THE ASSESSEE ENTERED INTO THE AGREEMENT FOR SALE OF LAND BEFORE MAY 2008. THUS, THE 8 SHRI SATISH K. MUNDE INTENTION O F THE ASSESSEE WAS NEVER TO HOLD THE LAND BUT TO SELL IT AND MAKE QUICK PROFITS IN WHICH HE SUCCEEDED. THUS, THE GAIN FROM SALE OF LAND IN THIS CASE IS CLEARLY NOT THE CAPITAL GAIN BUT A BUSINESS INCOME. NO DEDUCTION ON THE DEVELOPMENT EXPENDITURE OF RS. 4 6,89,000/ - IS ALLOWED FOR THE REASONS GIVEN IN THE PARA 5. 3 . BEING AGGRIEVED BY THE AFORESAID ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE FIRST APPELLATE AUTHORITY, WHEREIN THE LEARNED COMMISSIONER (APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: 11.0 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE A.R. OF THE APPELLANT. THE AR HAS CONTENDED THAT THE SURPLUS ARISING ON SALE OF AGRICULTURAL LANDS SOLD IN THE RELEVANT FINANCIAL YEAR IS NOT CHARGEABLE TO TAX AS THE LAND S OLD WAS SITUATED BEYOND 8 K MS. FROM THE MUNICIPAL LIMIT OF NAGPUR AND THE LAND BEING NOT A CAPITAL ASSET IN TERMS OF PROVISIONS OF SECTION 2(14) OF THE I.T. ACT, 1961 IS EXEMPT FROM CAPITAL GAINS TAXATION. THE AR HAS ENCLOSED THE COPIES OF EXTRACTS IN FORM NO.7/12, WHICH INDICATE THAT THE LANDS SOLD BY THE APPELLANT ARE RECORDED AS AN AGRICULTURAL LAND IN REVENUE RECORDS. THE AR FURTHER SUBMITTED THAT THE LAND WAS PURCHASED AND HELD AS AN AGRICULTURAL LAND UNTIL IT WAS SOLD ALSO AS AN AGRICULTURAL LAND AND THE ASSESSEE HAS NEVER APPLIED FOR PERMISSION FOR N.A. THE EVIDENCES FURNISHED BY THE AR IN SUPPORT OF HIS CLAIM THAT SUCH LAND WAS USED FOR CARRYING ON THE AGRICULTURAL ACTIVITY ARE PLACED IN THE PAPER BOOK. THE AR FURTHER SUBMITTED THAT ASSESSEE HAS BEEN SHOWING THE AGRICULTURAL INCOME FROM THE LANDS, INCLUDING THE LAND IN QUESTION, IN THE PAST ASSESSMENT YEARS, WHICH HAS BEEN ACCEPTED BY THE AO. THE COPIES OF THE SALE DEEDS ARE ALSO PLACED ON RECORD TO DEMONSTRATE THAT THE LAND SOLD WAS AN AGRICULTURAL L AND. BESIDES, THE AR HAS ENCLOSED THE CERTIFICATE FROM THE TALATHI OFFICE THAT THE AGRICULTURAL LAND IN QUESTION SOLD BY THE ASSESSEE AT SURVEY NO.30, KHASARMARI WAS SITUATED BEYOND THE 8 KMS. OF MUNICIPAL LIMITS OF NAGPUR. THIS FACT HAS NOT BEEN DISPUTED BY THE AO. 11 . 1 AS REGARDS TO THE CONDITIONS, BEING NO.6 & 8 OF MAHARASHTRA LAND REVENUE ACT, 1966 WHICH HAVE BEEN REPRODUCED BY THE AO IN HIS ORDER, THE AR CONTENDED THAT THE AO, WHILE INTERPRETING THE AFORESAID CONDITIONS, HAS INFERRED AN ADVERSE VIEW AND CONCLUDED THAT THE LAND IS PURCHASED FOR NON - AGRICULTURAL PURPOSE. IN THIS REGARD, THE AR HAS INVITED THE ATTENTION TO THE CONDITION NO.5 STIPULATED U/S 44 OF MAHARASHTRA LAND REVENUE ACT, 1966, WHICH STIPULATES THAT THE PURCHASER OF 9 SHRI SATISH K. MUNDE LAND IN ORDER TO USE SUCH LAND FOR NON - AGRICULTURAL PURPOSE, IS REQUIRED TO OBTAIN AN APPROVAL AS PER THE PROVISIONS OF SECTION 44 OF MAHARASHTRA LAND REVENUE ACT, 1966. THUS THE AR CONTENDED TH AT CONDITION NO.6 & 8 RELIED ON BY THE AO, AS STIPULATED UNDER MAHARASHTRA LAND REVENUE ACT, 1966, ARE APPLICABLE ONLY WHEN APPROVAL HAS BEEN OBTAINED FOR CONVERSION OF AGRICULTURAL LAND INTO NON - AGRICULTURAL LANDS AS PER THE SAID PROVISIONS OF THE LAND REVENUE ACT, AS PRESCRIBED IN THE CONDITION NO.5 OF THE LETTE R ADDRESSED TO THE BDO BY TEH ADDITIONAL DISTRICT MAJISTRATE . IT, HOWEVER, IS AN UNDISPUTED FACT THAT THE APPELLANT HAS NOT APPLIED FOR CONVERSION OF THE AGRICULTURAL LAND FOR NON - AGRICULTURAL PURPOSES. THE AR THUS CONTENDED THAT THE LAND IN QUESTION REMAINED AS AN AGRICULTU RAL LAND IN THE REVENUE RECORDS BOTH AT THE TIME OF PURCHASE AND SALE COUPLED WITH THE FACT THAT THE LAND IN QUESTION WAS NOT USED FOR THE PURPOSES OTHER THAN THE AGRICULTURAL PURPOSE. I FIND SUBSTANTIAL FORCE IN THE CONTENTIONS OF THE AR OF THE APPELLANT THAT MERELY BECAUSE THERE EXISTS A CONDITION THAT ANY AGRICULTURAL LAND PURCHASED BY A NON - ADIWASI FROM A ADIWASI SHOULD BE USED BY SUCH PURCHASER ONLY FOR NON - AGRICULTURAL PURPOSE FOR WHICH IT HAS BEEN BOUGHT WITHIN 3 YEARS, DOES NOT MEAN THAT THERE IS AN Y PROHIBITION FOR USE OF LAND FOR AGRICULTURAL PURPOSES WITHIN THE STIPULATED PERIOD OF 3 YEARS. THE PRE - CONDITION THAT SUCH LANDS SHOULD BE USED FOR NON - AGRICULTURAL PURPOSES WITHIN A PERIOD OF 3 YEARS BY THE PURCHASER BECOMES OPERATIONAL ONLY WITH EFFECT FROM THE DATE ON WHICH PERMISSION FOR N.A. WAS GRANTED. THUS MERE EXISTENCE OF A RULE DOES NOT CHANGE THE CHARACTER OF THE LAND UNLESS ACTED UPON IN ACCORDANCE TO THAT RULE. BUT THAT BEING NOT A CASE, THE CONDITIONS STIPULATED AT NO. 6 & 8 READ WITH CONDI TION NO.5 OF SECTION OF MAHARASHTRA LAND REVENUE ACT, 1966 DO NOT APPLY TO THE PRESENT CASE OF THE APPELLANT. FURTHER THAT THE SAID PROVISIONS STIPULATED U/S 44 OF THE LAND REVENUE ACT DO NOT PROHIBIT FURTHER SALE OF AGRICULTURAL LAND WITHIN A PERIOD OF 3 YEARS DURING WHICH THE LAND IN QUESTION AS PER THE SAID PROVISIONS OF LAW WAS REQUIRED TO BE USED FOR THE PURPOSES OTHER THAN THE AGRICULTURAL PURPOSE. 11.2 ON PERUSAL OF THE 7/12 EXTRACT, IT IS SEEN THAT IT CLEARLY SPECIFY THE NATURE OF CROP AND THE AREA UNDER CULTIVATION, WHICH HAS NOT BEEN DISPUTED. THE AR, THEREFORE, CONTENDS THAT THE AO HAS NOT BROUGHT ANY EVIDENCE OR MATERIAL ON RECORD TO SHOW THAT THE APPELLANT HAS USED THE LAND FOR THE PURPOSES OTHER THAN A G RICULTURE. THE ASSESSEE HOLDS VARIOUS OTH ER LANDS IN ADDITION TO THE LAND SOLD IN QUESTION AS FIXED ASSETS AND NOT AS BUSINESS ASSETS. IT IS ALSO AN UNDISPUTED FACT THAT THE APPELLANT HAS ALSO NOT CARRIED OUT ANY ACTIVITY FOR DEVELOPMENT TO MAKE THE LAND MARKETABLE, COUPLED WITH THE FACT THAT THE ASSESSEE NEVER APPLIED FOR CONVERSION OF LAND FROM AGRICULTURE TO NON - 10 SHRI SATISH K. MUNDE AGRICULTURE UNTIL IT WAS SOLD. THE AR HAS VEHEMENTLY ARGUED THAT MERELY BECAUSE THE AGRICULTURAL LAND WAS SOLD BY THE ASSESSEE IN A SHORT PERIOD AT HIGH PRICE CANNOT BE CONSTRUED THAT T HE SURPLUS RISING ON THE SALE OF AGRICULTURAL LAND IS TAXABLE AS BUSINESS PROFITS IN THE ABSENCE OF ANY EVIDENCE CONTRARY TO THE RECORDS. IN SUPPORT OF HIS CONTENTION, THE AR HAS CITED AN INSTANCE OF HIS OWN LAND TRANSACTION IN RESPECT OF SURVEY NO.22, KHA SARMARI, IN WHICH THE ASSESSEE HAS SUFFERED A LOSS OF RS.2 1.36 LAKHS, WHICH SHOWS THAT THERE WAS NO PROFIT MOTIVE IN THE SALE TRANSACTION OF LAND SOLD AT SURVEY NO.30, KHASARMARI. 11.3 IN SUPPORT OF HIS CONTENTION THAT AS ON THE DATE OF PURCHASE OF LAND AND AS ON THE DATE OF SALE OF LAND IF THE CHARACTER OF THE ASSET SOLD IS AN AGRICULTURAL LAND, SURPLUS ARISING ON THE SAME IS NOT TAXABLE, THE AR HAS RELIED ON THE FOLLOWING JUDGEMENTS: I ) 331 HR 59 (2011) CIT VS. SMT. DEBBIE ALEMAO II ) 217 ITR 333 (DEL.) D LF UNITED LTD. VS. CIT III ) 335 ITR 77 (DEL.) HINDUSTAN INDUSTRIAL RESOURCES LTD. VS. ACIT IV ) SUPREME COURT JUDGEMENT - (SLP) (CIVIL) CC 1727 - 1729/98 IN THE CASE OF CIT VS. M/S D.L.F. UNITED LTD. VIDE ORDER DATED 14/09/1995. 11.4 THE RATIO LAID DOWN IN THE ABOVE JUDGEMENTS SUPPORTS THE CASE OF THE APPELLANT. 1 1.5 THE ASSESSEE PLACES RELIANCE ON THE DECISION OF HON'BLE ITAT, NAGPUR BENCH, NAGPUR IN THE CASE OF SHRI SANJAY NAGORAO PAIDLEWAR IN ITA NO.112/NAG/2012 VIDE ORDER DATED 22/03/2013 WHEREIN AGRICULTURAL LANDS OWNED AND HELD BY ASSESSEE WAS HELD TO BE NOT EXIGIBLE TO CAPITAL GAIN TAX OR BUSINESS INCOME AS THE AGRICULTURAL LAND WAS LOCATED BEYOND 8 KILOMETERS, OF MUNICIPAL LIMIT OF NAGPUR. THE HON'BLE ITAT, NAGPUR BENCH, NAGPUR WHILE DECIDING T HE ISSUE IN FAVOUR OF ASSESSEE HAS PLACED RELIANCE ON THE DECISIONS OF HON'BLE APEX COURT, DELHI HIGH COURT AND BOMBAY HIGH COURT. ALL THE AFORESAID DECISIONS REFERRED TO HEREINABOVE SQUARELY APPLY TO THE FACTS IN THE CASE OF ASSESSEE. 11.6 THE ASSESSEE H AS ALSO PLACED RELIANCE ON DECISION RENDERED IN THE CASE OF SMT. ALKA PRAKASH AGARWAL FOR ASSTT. YEAR 2010 - 11 VIDE ORDER DATED 2/4/2014. IN THE AFORESAID CASE DECISION 11 SHRI SATISH K. MUNDE RELIED UPON HEREINABOVE IN RESPECT TO ITAT IN THE CASE OF SANJAY NAGORAO PAIDLEWAR DATED 22/3/2013 HAS BEEN FOLLOWED. 11 . 7 THE ASSESSEE PLACES RELIANCE ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF HINDUSTAN INDUSTRIAL RESOURCES LTD. AND IN PARTICULAR INVITE ATTENTION TO OBSERVATIONS OF JUDGEMENT AT PARA 9. THE RELEVANT OBSERVAT IONS ARE REPRODUCED HEREUNDER FOR READY REFERENCE. 'THUS, ON THE DATE OF PURCHASE, THE LAND IN QUESTION WAS AGRICULTURAL LAND AND ON THE DATE OF ACQUISITION, THE CHARACTER OF THE LAND CONTINUED TO BE AGRICULTURAL. WHEN THESE TWO CLEAR FINDINGS HAVE BEEN RETURNED, IT IS APPARENT THAT IN THE TRANSITIONAL PERIOD, THAT IS, BETWEEN PURCHASE AND ACQUISITION, THE NATURE AND CHARACTER OF THE LAND DID NOT CHANGE. THE FACT THAT THE APPEL LANT/ASSESSEE INTENDED TO USE THE LAND FOR INDUSTRIAL PURPOSES DID NOT IN ANY WAY ALTER THE NATURE AND CHARACTER OF THE LAND. THE FURTHER FACT THAT THE APPELLANT / ASSESSEE DID NOT CARRY OUT ANY AGRICULTURAL OPERATIONS DID NOT ALSO RESULT IN ANY CONVERSION OF THE AGRICULTURAL LAND INTO AN INDUSTRIAL LAND. IT IS NOBODY'S CASE THAT THE APPELLANT / ASSESSEE CARRIED OUT ANY OPERATIONS FOR SETTING UP ANY PLANT OR MACHINERY OR OF THE LIKE NATURE SO AS TO LEAD TO AN INFERENCE THAT THE NATURE AND CHARACTER OF THE L AND HAD BEEN CHANGED FROM AGRICULTURAL TO INDUSTRIAL. THE MERE FACT THAT THE APPELLANT ASSESSEE DID NOT CARR Y OUT ANY AGRICULTURAL OPERATION DID NOT ALTER THE NATURE AND CHARACTER OF THE LAND. IN ANY EVENT, THIS DISCUSSION IS NOT RELEVANT IN THE BACKDROP O F THE CLEAR FINDING GIVEN BY THE TRIBUNAL THAT ON THE DATE OF THE PURCHASE AND AS ALSO ON THE DATE OF ACQUISITION, THE LAND IN QUESTION WAS AGRICULTURAL LAND. HAVING COME TO SUCH A CONCLUSION, THE TRIBUNAL OUGHT NOT TO HAVE GONE INTO QUESTION OF INTENTION OF THE APPELLANT / ASSESSEE AND DEFINITELY NOT INTO THE QUESTION OF INTENTION OF THE LAND ACQUIRING AUTHORITY, THE LATTER BEING A WHOLLY IRRELEVANT CONSIDERATION. 11.8 AGRICULTURAL INCOME HAS BEEN DEFINED UNDER THE PROVISIONS OF INCOME TAX ACT 1961 IN SEC TION 2(1A) OF I.T. ACT 1961. THE PERUSAL OF DEFINITION OF AGRICULTURAL INCOME IN CLAUSE (A) WOULD INDICATE THAT THE AGRICULTURAL INCOME WOULD INCLUDE RENT OR REVENUE DERIVED FROM THE AGRICULTURAL LAND. THE MEANING OF REVENUE DERIVED FROM THE AGRICULTURAL L AND WOULD INCLUDE THE SURPLUS ARISING ON THE SALE OF AGRICULTURAL LAND. THE SUBMISSION MADE BY ASSESSEE IS IN LINE WITH THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF SHRI MANUBHAI SETH REPORTED AT 128 ITR 87 (BOM.). THE SURPLUS ON SALE OF AGRICU LTURAL LAND BEING IN THE NATURE OF REVENUE DERIVED FROM LAND WOULD CONSTITUTE AGRICULTURAL INCOME AND THUS IT IS NOT EXIGIBLE TO TAX CONSIDERING THE PROVISIONS OF SECTION 10(1) OF I.T. ACT 1961. IN THE CASE OF 12 SHRI SATISH K. MUNDE ASSESSEE SALE OF LANDS ARE IN RESPECT TO SALE OF AGRICULTURAL LANDS IS NOT IN DISPUTE FROM THE SIDE OF THE A.O. THE SURPLUS ARISING ON THE SALE OF LANDS IN THE CASE OF ASSESSEE BEING SALE OF AGRICULTURAL LAND IT WOULD CONSTITUTE AGRICULTURAL INCOME IN TERM OF DEFINITION OF AGRICULTURAL I NCOME GIVEN IN SECTION 2(1A) OF ACT 1961 AND SHALL BE EXEMPT U/S 10(1) OF I.T. ACT 1961. THE ASSESSEE FOR THIS PROPOSITION HAS PLACED RELIANCE ON THE DECISION OF HON'BLE ITAT, JODHPUR BENCH, JODHPUR (THIRD MEMBER) IN THE CASE OF SMT. SUPRIYA KANWAR IN ITA NO. 362/JU/20 10 VIDE JUDGEMENT DATED 13/05/2014. THE HON'BLE ITAT AFTER CONSIDERING THE LEGAL POSITION IN DETAIL HAS CONCLUDED THAT ON SALE OF AGRICULTURAL LAND SURPLUS ARISING IN THE CASE OF ASSESSEE IS AGRICULTURAL INCOME AND IS NOT EXIGIBLE TO TAX UNDER THE HEAD CAPITAL GAIN OR ADVE NTURE IN THE NATURE OF TRADE. THE RATIO LAID DOWN BY THE DECISION OF HON'BLE ITAT, JODHPUR BENCH, JODHPUR SQUARELY APPLIES TO THE FACTS IN THE CASE OF ASSESSEE AND CONSIDERING THE SAME THE ASSESSMENT OF SURPLUS ON SALE OF AGRICULTURAL LAND AS ADVENTURE IN THE NATURE OF TRADE AT THE HANDS OF ASSESSEE IS NOT JUSTIFIABLE. 11 . 9 THE AR HAS CONTENDED THAT THE DECISION OF THIRD MEMBER IS IN THE NATURE OF BINDING PRECEDENT AS DECISION OF SPECIAL BENCH OF ITAT. THE ASSESSEE IN THIS REGARD HAS PLACED RELIANCE ON THE DECISION OF SPECIAL BENCH OF ITAT, MUMBAI IN THE CASE OF OMAN INTERNATIONAL BANK LTD. REPORTED AT 110 LTD 285 (MUM.) (SB). 11.10 THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE DECISION OF HON'BLE ITAT, PUNE BENCH IN THE CASE OF HARESH V. MILANI REPORTED AT (2008) 114 LTD 428 VIDE ORDER DATED 7/9/2006 WHEREIN IT HAS BEEN HELD THAT: 'EXTRACTS OF RECORDS MAINTAINED BY AUTHORITY FOR AGRICULTURAL LAND RECORD AND LAND REVENUE, SHOWING THAT LAND WAS SUBJECTED TO LAND REVENUE, WAS CLASSIFIED AS CULTIVABLE LAND, NAT URE OF CROP PRODUCED WAS RICE AND ANIMAL FEED GRASS AND LAND WAS CULTIVATED BY ASSESSEE HIMSELF, MERE INCLUSION OF LAND IN THE INDUSTRIAL ZONE WITHOUT ANY INFRASTRUCTURE DEVELOPMENT THEREUPON OR WITHOUT PROVING THAT LAND WAS PUT TO NON - AGRICULTURAL USE CANNOT CONVERT THE AGRICULTURAL LAND INTO NON AGRICULTURAL LAND AND NO CAPITAL GAINS AROSE ON THE SALE THEREOF. 11.11 THE HON'BLE ITAT, DELHI BENCH, DELHI IN THE RECENT DECISION IN THE CASE OF MARIGOLD MERCHANDISE (P) LTD. VS. DCIT REPORTED AT 38 CCH 05 0 (DEL.) (TRIB.) HAS HELD THAT: 'WHERE NOTHING WAS BOUGHT ON RECORD TO SHOW THAT ASSESSEE WAS ENGAGED IN ADVENTURE IN NATURE OF TRADE, AND THEN ASSESSEE'S GAINS FROM SALE OF SPECIFIED AGRICULTURE LAND WAS EXEMPT INCOME AND NOT BUSINESS INCOME.' 13 SHRI SATISH K. MUNDE 11.12 THE AR IN REBUTTAL TO THE AO'S CONTENTION THAT ASSESSEE HAS SOLD THE LAND TO BUILDER M/S. VATSALYA REALITIES ON WHICH NOW STANDS A HOUSING PROJECT SUBMITTED THAT THE PERSON TO WHOM LAND IS SOLD IS OF NO RELEVANCE IN DETERMINING THE NATURE AND CHARACTER OF THE LAND. THE LAND REMAINED AGRICULTURAL LAND TILL THE DATE IT WAS SOLD. THE FUTURE USE BY THE PURCHASER IS ALSO NOT RELEVANT FOR THE PURPOSE OF DETERMINATION OF TRUE CHARACTER AND NATURE OF LAND. THE LAND SOLD BY ASSESSEE AT THE RELEVANT POINT OF TIME OF SALE WAS AGRICULTURE LANDS AND THUS GAIN ARISING ON SALE OF AGRICULTURE LAND IS NOT CHARGEABLE TO TAX. THE AR HAS PLACED RELIANCE ON THE FOLLOWING JUDGEMENTS: I ) (1981) 127 ITR 664 (GUJ.) GORDHANBHAI KAHANDAS DALWADI VS. CIT II ) (1981) 127 ITR 671 (GUJ.) DR. MOTIBHAI D. PATEL VS. CIT III ) (2007) 288 ITR 319 (GUJ.) COMMISSIONER OF WEALTH TAX VS. SHASHIBEN 11.13 THE ASSESSEE PLACES RELIANCE ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS MANUAL SOMNATH REPORTED AT 106 ITR 917 WHERE IN IT HA S BEEN HELD BY HON'BLE COURT THAT: 'IN A SALE OF PLOT OF LAND, TO DECIDE WHETHER THE LAND IS AGRICULTURAL OR NOT, WHAT HAS TO BE CONSIDERED IS WHAT WAS THE CHARACTER OF LAND AT THE TIME WHEN THE SALE TOOK PLACE AND NOT WHAT THE PURCHASER DID OR WAS SUPPOSED TO DO WITH THE LAND.' 11 . 14 THE A. O . AT PARA 4.10 OF THE ASSESSMENT ORDER HAS REFERRED TO DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF DCIT VS. GOPAL RARNNARAYAN KASAT REPORTED AT 328 ITR 556 (BORN.) WHEREIN HON'BLE BOMBAY HIGH COURT HAS RULED THAT THE INTENTION OF THE ASSESSEE IS A PARAMOUNT CONDITION IN DECIDING WHETHER LAND IS STOCK IN TRADE OR AN INVESTMENT OF AN ASSESSEE. THE AR HAS SUBMITTED THAT IN THE AFORESAID CASE THREE BROTHERS ALONG WITH AN ADVOCATE PURCHASED CERTAIN AGRICU LTURAL LANDS BETWEEN YEAR 1992 AND 1998. THE LAND WAS ACQUIRED IMMEDIATELY THEREAFTER BY THE STATE GOVERNMENT AND ASSESSEE RECEIVED COMPENSATION/ ENHANCED COMPENSATION. THE A.O. OBSERVED THAT ASSESSEE DID NOT HAVE ANY INTENTION TO HOLD THIS LAND AND CULTIV ATE THE SAME, THEREFORE SURPLUS RECEIVED BY ASSESSEE IN RESPECT OF THIS LAND WAS HELD TO BE TAXABLE AS BUSINESS INCOME TERMING THE TRANSACTION AS AN ADVENTURE IN THE NATURE OF TRADE. IN THE AFORESAID CASE THE ASSESSEE WERE INVOLVED IN SERIES OF TRANSACTION S OF PURCHASING LANDS WHICH WERE NOTIFIED OR LIKELY TO BE NOTIFIED FOR ACQUISITION BY THE 14 SHRI SATISH K. MUNDE GOVERNMENT. THIS FACT IS TOTALLY DISTINGUISHABLE FROM THE FACTS IN THE CASE OF ASSESSEE. IN THE CASE OF ASSESSEE THERE IS NO SUCH ACQUISITION OR PURCHASE OF LAND WITH AN EYE ON THE IMPENDING ACQUISITION AND THE COMPENSATION AMOUNTS BY THE STATE GOVERNMENT. THEREFORE, THE AFORESAID DECISION IS NOT APPLICABLE IN THE CASE OF ASSESSEE AS THE FACTS THEREIN ON THE BASIS OF WHICH THE HON'BLE HIGH COURT COMES TO THE CONCLUSION ARE ENTIRELY DIFFERENT. 11.15 THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF ITAT, NAGPUR BENCH, NAGPUR IN THE CASE OF SHRI BHOPINDERSINGH ARNEJA IN ITA NO.166/NAG/2012 VIDE JUDGEMENT DATED 15/2/2013 WHEREIN EVEN AFTER CONSIDERING THE JUDGEMENT OF H ON'BLE BOMBAY HIGH COURT IN THE CASE OF GOPAL KASAT IT HAS BEEN HELD THAT SURPLUS ARISING ON SALE OF AGRICULTURAL LAND BEYOND 8 KM OF MUNICIPAL LIMITS IS NOT CHARGEABLE TO TAX. RATIO LAID DOWN BY THE SAID DECISION SQUARELY SUPPORTS THE SUBMISSION OF ASSESS EE. 11.16 IN THE LIGHT OF THE ABOVE FINDINGS AND THE JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT, THE SURPLUS OF R S.97,44,550/ - ARISING ON SALE OF KASARMARI LAND AT SURVEY NO.30 IS HELD TO BE EXEMPT U/S 10(1) OF I.T. ACT 1961. 12.0 THE A.O. AT PARA 4.2.2 OF THE ASSESSMENT HAS MADE OBSERVATION THAT IN THE EVENT, IF INCOME HAS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN, THE PROVISIONS OF SECTION 50C OF I.T. ACT, 1961 ARE REQUIRED TO BE CONSIDERED THE ASSES SEE HAVING AMPL Y DEMONSTRATED THAT THE SURPLU S ARISING ON THE SALE OF AGRICULTURAL LANDS BEING AGRICULTURAL INCOME AND BEING NOT ASSESSABLE UNDER THE HEAD CAPITAL GAIN, THUS THE INVOCATION OF PROVISIONS OF SECTION 50C OF I.T. ACT, 1961 IS NOT APPLICABLE. 13.0 TRANSACTION OF LAND AT SURVEY NO.22, KHA SARMARI: THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAS SOLD ANOTHER LAND AT SURVEY NO.22 AT KHASARMARI AND THIS TRANSACTION WAS NOT SHOWN IN THE RETURN FILED. THE ASSESSEE WAS ASKED TO EXPLAIN THE TRANSACTION. THE ASSESSEE SUB MITTED BEFORE THE AO THAT THE LAND WAS AN AGRICULTURAL LAND AND THERE WAS LOSS IN THE TRANSACTION AS THE LAND WAS PURCHASED FOR RS. 66,56,800/ - AND SOLD FOR RS. 45,20,000/ - . THE COUNSEL OF THE ASSESSEE THUS SUBMITTED THAT THERE WAS NO EFFECT ON THE TAX LIA BILITY OF THE ASSESSEE, THE TRANSACTION WAS NOT SHOWN IN THE RETURN OF INCOME. THE AGRICULTURAL LAND IN QUESTION WAS PURCHASED ON 03.07.2007 FROM A GROUP OF TRIBAL LAND OWNERS, FOR WHICH SPECIAL PERMISSION FOR PURCHASE WAS OBTAINED FROM THE COMPETENT AUTHO RITY, AS PER THE MAHARASHTRA LAND REVENUE 15 SHRI SATISH K. MUNDE ACT, 1966. THIS LAND WAS SOLD IN TWO PARTS AS UNDER: I ) 0.9 HECTARE LAND TO RAI GROUP, DELHI SALE CONSIDERATION RECEIVED .. RS. 28,00,000/ STAMP DUTY VALUATION .. RS.63,00,000/ II ) 0.87 HECTARE LAND OF WIFE SMT. VANMALA MUNDE AND SHI KISAN YADAV SALE CONSIDERATION RECEIVED .. RS.17,20,000 STAMP DUTY VALUATION .. RS.17,01,000 13.1 THE AO OBSERVED FROM THE SALE DEED OF LAND SOLD TO RAI GROUP THAT THE LAND WAS A NON - AGRICULTURAL LAND, THEREFORE IT BEING A C APITAL ASSET, ATTRACT PROVISIONS OF SECTION 50C OF THE I.T. ACT, 1961, IN ACCORDANCE TO WHICH THE DEEMED SALE CONSIDERATION WOULD BE RS.63,00,000/ - BEING THE STAMP DUTY VALUATION OF THE LAND, AS AGAINST THE ACTUAL SALE CONSIDERATION OF RS.28,00.000/ - , RESULTING INTO SHORT TERM CAPITAL GAIN (STCG) OF RS.35,00,000/ - . THE AO THUS DISCARDED THE CONTENTION OF THE ASSESSEE THAT THE LAND IN QUESTION WAS AN AGRICULTURAL LAND. 13.2 AS REGARDS TO THE LAND SOLD BY THE ASSESSEE TO HIS WIFE, SMT. VANMALA MUNDE, THE AO, IN PARA 4.2.3 OF ASSESSMENT ORDER, HAS RECORDED A FINDING THAT IT IS NOT CLEAR FROM RECORD WHETHER THE LAND IN QUESTION WAS CONVERTED INTO NON - AGRICULTURAL LAND OR NOT. HOWEVER, ON PERUSAL OF THE 7/12 EXTRACT, THE AO FOUND THAT THERE WAS NO AGRICULTUR AL ACTIVITY CARRIED ON THE LAND AND THE LAND IN QUESTION WAS DECLARED AS 'BARREN/FALLOW LAND'. THE AO THUS CONCLUDED THAT SINCE THE LAND WAS PURCHASED FROM THE GROUP OF TRIBALS, AFTER OBTAINING PERMISSION FROM THE GOVERNMENT, THEREFORE THE INTENTION OF THE ASSESSEE WAS TO SELL IT AND NOT TO CULTIVATE IT. THE AO ACCORDINGLY TREATED THE SURPLUS ARISING OUT OF SALE OF LANDS AS 'INCOME FROM BUSINESS' AS AGAINST 'CAPITAL GAINS'. 14.0 THE AR OF THE APPELLANT HAS FILED HIS WRITTEN SUBMISSION, WHICH IS REPRODUCED IN PARA 10 ABOVE HAS BEEN CONSIDERED. 15 . 0 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE AR OF THE APPELLANT, THE ORDER OF THE AO AND THE JUDICIAL DECISIONS RELIED UPON BY THE AR. ON CAREFUL EXAMINATION OF THE FACTS, IT IS SEEN THAT THE LAND OF 0.9 HECTARES SOLD TO RAI GROUP, DELHI IS U NDISPUTEDLY A CAPITAL GAIN TRANSACTIONS IN AS MUCH AS THAT THE ASSESSEE HIMSELF HAS CONFESSED THAT THERE WAS A LOSS IN THE TRANSACTION OF LAND DUE TO WHICH IT WAS NOT REPORTED IN THE 16 SHRI SATISH K. MUNDE RETURN OF INCOME FILED. THE ASSESSE E OBVIOUSLY MEANS THE CAPITAL LOSS BEING THE DIFFERENCE BETWEEN THE PURCHASE PRICE AND THE SALE PRICE OF THE LAND. THE SALE DEED ALSO SHOWS THE LAND SOLD AS NON - AGRICULTURAL LAND, THEREFORE IT CONSTITUTE A CAPITAL ASSET. SINCE THE LAND IN QUESTION WAS SOLD FOR RS.28 LAKHS AS AGAINST THE STAMP DUTY VALUATION DETERMINED AT RS.63 LAKHS BY THE STAMP VALUATION AUTHORITIES, HENCE, PROVISIONS OF SECTION 50C OF THE I.T. ACT, 1961 ARE ATTRACTED IN THE CASE OF THE APPELLANT IN RESPECT OF THE TRANSACTION OF LAND SOLD TO RAI GROUP OF DELHI. AS PER THE PROVISIONS OF SECTION 50C OF THE ACT THE DEEMED SALE CONSIDERATION WOULD BE RS.63 LAKHS, RESULTING INTO SHORT TERM CAPITAL GAIN OF RS.35 LAKHS ON THE LAND SOLD BEING 0.9 HECTARES TO RAI GROUP DELHI. THEREFORE, I DECLINE TO AGREE WITH THE AO TO TREAT THE TRANSACTION AS ADVENTURE IN NATURE. HOWEVER, I AM INCLINED TO AGREE WITH THE FINDING OF THE AO THAT THE SHORT TERM CAPITAL GAINS ARE CHARGEABLE IN RESPECT OF THIS TRANSACTION AS PER THE DEEMING PROVISIONS OF SECTION 50C OF T HE I.T. ACT, 1961. ACCORDINGLY, THIS ADDITION IS UPHELD AS CAPITAL GAIN TRANSACTION. 15 . 1 COMING TO THE TRANSACTION OF SALE OF BEING 0.87 HECTRARES OF LAND SOLD BY ASSESSEE TO HIS WIFE , IT IS SEEN THAT THE SALE CONSIDERATION RECEIVED OF RS. 17,20,000/ - I S MORE THAN THE STAMP DUTY VALUATION OF RS. 17,01,000/ - . FURTHER, THE AO HAS RECORDED A FINDING IN PARA 4.2.3 OF HIS ORDER THAT 'IT IS NOT CLEAR FROM THE SALE DEED WHETHER THE LAND WAS CONVERTED INTO NON - AGRICULTURAL LAND OR NOT'. THE ASSESSEE HAS ALSO FURNISHED THE 7/12 EXTRACTS IN SUPPORT OF HIS CLAIM THAT THE LAND IN QUESTION IS AN AGRICULTURAL LAND. THE AO HAS NOT BROUGHT OUT ANY EVIDENCE TO SHOW THAT THE LAND IN QUESTION SOLD BY ASSESSEE TO HIS WIFE WAS NOT AN AGRICULTURAL LAND. THEREFORE, CONSIDERI NG THE JUDICIAL DECISIONS RELIED UPON BY THE AR OF THE APPELLANT IN PARA 11 ABOVE, THE LAND IN QUESTION SOLD TO HIS WIFE BEING 0.87 HECTARES IS TREATED AS 'AGRICULTURAL LAND' IN THE ABSENCE ANY EVIDENCE CONTRARY TO THE RECORDS. 15.2 TRANSACTION OF LAND AT GHARKHEDA, AURANGABAD: THE APPELLANT HAS OBJECTED TO THE ADDITION OF R S . 1,52,95,250/ - MADE BY THE AO ON ACCOUNT OF SURPLUS ARISING ON SALE OF GARKHEDA LAND, AURANGABAD. THE AO, IN THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAS SOLD A P LOT AT GARKHEDA, AURANGABAD TO M/S MANIK HOSPITAL & RESEARCH CENTRE PVT. LTD., FOR A SALE CONSIDERATION OF RS.4,01,60,000/ - . THIS PLOT WAS PURCHASED ON 24.04.2006 FOR RS.2,48,64,750/ - AND OFFERED FOR LONG TERM CAPITAL GAIN OF RS.47,89,703/ - AFTER CLAIMING INDEXATION. THE AO IN PARA 4.3.1 OF HIS ASSESSMENT ORDER HAS RECORDED A FINDING THAT 'PRIMA - FACIE AND IN ISOLATION THE CLAIM OF LONG TERM CAPITAL GAIN MADE BY THE ASSESSEE SEEMS 17 SHRI SATISH K. MUNDE TO BE IN ORDER AS THE LAND HAS BEEN HELD BY THE ASSESSEE FOR LITTLE OVER THREE YEARS' . THE AO, HOWEVER, HAS TREATED THE GAIN FROM SALE OF THE LAND AS 'INCOME FROM BUSINESS' AS AGAINST CAPITAL GAINS DECLARED BY THE APPELLANT. THE REASON ASSIGNED BY THE AO IS THAT THE ASSESSEE HAS PURCHASED THE LAND ON 24.04.2006 AS AN AGRICULTURAL LAND AND SOLD THE SAME IN MAY, 2008 AFTER GETTING N.A. FROM THE DM, AURANGABAD WHICH TRANSACTION ACCORDING TO THE AO, WAS IN THE NATURE OF ADVENTURE IN TRADE. THE AO, ACCORDINGLY TREATED THE SURPLUS ARISING ON SALE OF LAND AS 'INCOME FROM BUSINESS' AND DENIED THE DEDUCTION FOR CLAIM OF DEVELOPMENTAL EXPENDITURE OF RS .46,89,000/ - . 16.0 THE RELEVANT PORTION OF SUBMISSION FILED BY THE AR OF THE APPELLANT IS REPRODUCED BELOW FOR BET TER APPRECIATION OF FACTS: '3. IN GROUND NO. 7 ASSESSEE HAS CHALLENGED THE ADDITION MADE BY THE 14.0. AT RS.1,52,95,2501 - AS BUSINESS INCOME AS AGAINST SHOWN BY ASSESSEE UNDER THE HEAD LONG TERM CAPITAL GAIN ON SALE OF LAND AT GHARKHEDA. THE A.0. HAS DISC USSED ADDITION AT PARA 4.3 OF ASSESSMENT ORDER. THE A.O. HAS HELD THAT ASSESSEE IS ENGAGED IN THE ACTIVITY OF PURCHASE AND SALE OF LAND AND THUS SURPLUS ARISING ON THE SALE OF SAME HAS BEEN ASSESSED AS INCOME FROM BUSINESS AND NOT UNDER THE HEAD LONG TERM CAPITAL GAIN AS SHOWN BY ASSESSEE IN THE RETURN OF INCOME. 4. IT IS RESPECTFULLY SUBMITTED THAT THE ADDITION MADE BY THE 14.0. IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. THE ASSESSEE REQUESTS TO CONSIDER THE FOLLOWING SUBMISSION IN RESPECT TO SAME. A) TH E ASSESSEE HAS PURCHASED AGRICULTURAL LAND AT GHARKHEDA ON 21/4/2006. THE AFORESAID LAND WAS ACQUIRED BY ASSESSEE FOR RESIDENTIAL PURPOSE AND HAS ACCORDINGLY APPLIED FOR CONVERSION OF AGRICULTURAL LAND INTO NON AGRICULTURAL LAND. THE PERMISSION OF CONVERSI ON OF LAND INTO NON AGRICULTURAL LAND WAS GRANTED BY DISTRICT MAGISTRATE, AURANGABAD ON 2811212006. THE ASSESSEE HAS ACQUIRED THE AGRICULTURAL LAND ON 2110412006. THE AFORESAID FACTS ARE OBSERVED BY THE A.O. AT PARA 4.3.1. OF THE ASSESSMENT ORDER. THE ASSESSEE HAS SOLD THE AFORESAID LAND BY EXECUTING SALE DEED ON 251912009 FOR TOTAL CONSIDERA TION OF RS. 4,01,60,000/ - . THE CAPITAL ASSET BEING LAND SOLD BY ASSESSEE HAVING BEEN HELD FOR MORE THAN 36 MONTHS ASSESSEE HAD COMPUTED THE LONG TERM CAPITAL GAIN ON SALE OF SUCH LAND AFTER CONSIDERING THE INDEXED COST OF ACQUISITION AND COST OF IMPROVEMEN T ON SUCH LAND AND SHOWN ASSESSABLE LONG TERM CAPITAL GAIN AT THE HANDS OF ASSESSEE IN RETURN OF INCOME AT RS.47,89,7031 - . 18 SHRI SATISH K. MUNDE B) IT IS RESPECTFULLY SUBMITTED THAT THE CAPITAL ASSET HELD BY ASSESSEE IS FOR MORE THAN 36 MONTHS. THE AFORESAID CAPITAL ASSET ACQUIRED BY ASSESSEE HAS BEEN SHOWN IN THE BALANCE SHEET AS INVESTMENT IN CAPITAL ASSET. IN THE CASE OF ASSESSEE ASSESSMENTS HAVE BEEN FRAMED U/S 143(3) OF 1. T. ACT 1961 AND THE AFORESAID ASSET HAVING BEEN SHOWN IN THE BALANCE SHEET AS CAPITAL ASSET HAS N OT BEEN DISPUTED BY THE A.0. ON THE ABOVE UNDISPUTED FACTUAL POSITION, THERE IS NO CASE FOR THE A. 0. TO ASSESS THE SURPLUS ON SALE OF CAPITAL ASSET AS INCOME FROM BUSINESS. C) IT IS RESPECTFULLY SUBMITTED THAT THE A.O. HAS NOT BROUGHT ANY MATERIAL OR EVI DENCE ON RECORD TO SHOW THAT THE AGRICULTURAL LAND PURCHASED BY ASSESSEE WAS FOR INTENTION OF TRADE AND HAS BEEN HELD BY ASSESSEE AS STOCK IN TRADE. IN THE ABSENCE OF THERE BEING ANY EVIDENCE ON RECORD TO SHOW THAT THE LAND PURCHASED WAS IN THE NATURE OF S TOCK IN TRADE AT THE HANDS OF ASSESSEE, ASSESSING OF SURPLUS ON SALE THEREOF OR BROUGHT TO TAX AS BUSINESS INCOME IS NOT JUSTIFIED. IN VIEW OF ABOVE ADDITION MADE BY THE A.O. BY HOLDING THE SAME TO BE BUSINESS INCOME IN THE CASE OF ASSESSEE IS UNJUSTIFIED AND UNSUSTAINABLE. D) THE EXPENSES INCURRED ARE MERELY LEVELING AND FENCING SO AS TO MAKE FIT FOR RESIDENTIAL USE. IT IS NOT A DEVELOPMENTAL ACTIVITY FOR CARRYING ON ANY TRADE OR BUSINESS. 5. CONSIDERING THE SUBMISSIONS MADE HEREINABOVE, IT IS HUMBLY PRAYED THAT THE LONG TERM CAPITAL GAIN ARISING ON SALE OF LAND IN THE CASE OF ASSESSEE AS SHOWN IN THE RETURN BE DIRECTED TO BE ACCEPTED AND GROUND OF APPEAL OF ASSESSEE BE ALLOWED.' 17.0 THE A R HAS RAISED THE CONTENTION THAT THE ASSESSEE PURCHASED THE AGRICULTURAL LAND AT GARKHEDA, IN APRIL 2006 FOR THE RESIDENTIAL PURPOSE AND IT IS BUT FOR THIS PURPOSE THAT THE ASSESSEE APPLIED FOR CONVERSION OF LAND INTO NON - AGRICULTURAL LAND, WHICH WAS GRANT ED BY THE DISTRICT MAGISTRATE, AURANGABAD IN DECEMBER, 2006. THE AR FURTHER CONTENDED THAT THE SAID LAND BEING A CAPITAL ASSET PURSUANT TO SUCH CONVERSION, INTO NA WAS SOLD VIDE SALE DEED ON 25.09.2009 AS CAPITAL ASSET AND SINCE THE LAND IN QUESTION WAS HE LD FOR THE PERIOD EXCEEDING 36 MONTHS, RESULTANT SURPLUS WAS DECLARED AS LONG TERM CAPITAL GAIN TO THE TUNE OF RS.47,89,703/ - AFTER CLAIMING THE COST OF ACQUISITION AND BENEFITS OF INDEXATION. THE AR FURTHER SUBMITTED THAT THE SAID LAND AT GARKHEDA WAS SH OWN IN THE BALANCE SHEET AS INVESTMENT IN CAPITAL ASSET AND THIS FACT HAS NOT BEEN DISPUTED BY THE AO. THE AR, THEREFORE, CONTENDED THAT THERE IS NO SCOPE TO ASSESS THE SURPLUS AS INCOME FROM BUSINESS. THE AR ALSO SUBMITTED THAT THE LD. AO HAS NOT BROUGHT ANY MATERIAL EVIDENCE ON RECORD TO DEMONSTRATE THAT THE LAND IN QUESTION 19 SHRI SATISH K. MUNDE HELD BY THE ASSESSEE WAS ACQUIRED FOR INTENTION OF TRADE OR HAS BEEN HELD AS STOCK - IN - TRADE. THEREFORE, ACCORDING TO THE AR IN THE ABSENCE OF THERE BEING ANY EVIDENCE CONTRARY TO THE RECORDS, THE ACTION OF THE AO TO TREAT THE SURPLUS AS 'INCOME FROM BUSINESS' IS NOT JUSTIFIED. THE AR ALSO VEHEMENTLY ARGUED THAT THE DEVELOPMENT EXPENSES WERE INCURRED BY THE ASSESSEE TO THE TUNE OF RS.46,89,000/ - ON THE SAID PLOT OF LAND BEFORE SALE, THE AO THEREFORE WAS ALSO NOT JUSTIFIED IN DISALLOWING THE SAME. 1 8 . 0 ON CAREFUL EXAMINATION OF THE FACTS, IT IS SEEN THAT THE SU BMISSION FILED BY THE AR OF THE APPELLANT CARRIES MUCH S UBSTANCE IN THE SENSE THAT THE APPELLANT PURCHASED THE PLOT OF LAND PRIMARILY FOR THE RESIDENTIAL PURPOSE, WHICH WAS SOLD AFTER CONVERSION INTO THE N.A. THE APPELLANT HAS ALSO DECLARED THE RESULTANT GAINS AS LONG TERM CAPITAL GAINS AFTER CLAIMING THE BENEFIT OF INDEXATION AND DEVELOPMENT EXPENSES INCURRED. THEREFORE, UNDER THE FACTS AND CIRCUMSTANCES, THE AO IS NOT JUSTIFIED TO TREAT THE TRANSACTION IN QUESTION AS AN ADVENTURE IN TRADE, MORE PARTICULARLY IN VIEW OF THE FINDING GIVEN BY THE AO IN THE ASSESSMENT ORDER AS 'PRIMA - FACIE AND IN ISOLATION THE CLAIM OF LONG TERM CA PITAL GAIN MADE BY THE ASSESSEE SEEMS TO BE IN ORDER AS THE LAND HAS BEEN HELD BY THE ASSESSEE FOR LITTLE OVER THREE YEARS' FURTHER THAT, THE FACT THAT THE LAND IN QUESTION SOLD WAS SHOWN AS INVESTMENT IN CAPITAL ASSET IN THE BALANCE SHEET BY THE ASSESSEE WHICH IS NOT DISPUTED. THEREFORE, IN THE ABSENCE OF ANY EVIDENCE CONTRARY TO THE RECORDS TO DEMONSTRATE THAT THE LAND WAS PURCHASED AS STOCK - IN - TRADE BY THE ASSESSEE, THE TRANSACTION IN GARKHEDA LAND IS HELD TO BE A CAPITAL GAIN TRANSACTION. 4 . AGGRIEVED B Y THE ORDER SO PASSED BY THE LEARNED COMMISSIONER (APPEALS), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELYING ON THE ORDER PASSED BY THE ASSESSING OFFICER SUBMITTED THAT THE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE. 20 SHRI SATISH K. MUNDE 6 . THE SUBMISSIONS OF THE ASSESSEE ARE AS UNDER: GR NO: I TO 7: ADDITION BY TREATING SURPLUS ON SALE OF AGRICULTURAL LANDS A D OTHER LAND AS BUSINESS INCOME KHASARMARI S.NO 30 RS 97,44,550 (AGRICLUTURAL LAND) KHASARMARI S.NO 22 RS (21,36,800) (AGRICULTURAL LAND ) GHARKHEDA LAND RS 1,52,95,250 (N.A LAND) I) KHASARMARI SR. NO 30& 22 PURCHASE DEED OF KHASARMARI SR. NO30 P - 2 - 17 [VOL - I] SALE DEED OF KHASARMARI SR. NO30 P - I 8 - 33 [VOL - I] PURCHASE DEED OF KHASARMARI SR. NO22 P - 35 - 50 [VOL - I] SALE DEED KHASARMARI SR. NO 22 P - 51 - 64 [VOL - I] A ) AGRICULTURAL LANDS ARE LOCATED BEYOND 8 KILOMETERS FROM MUNICIPAL LIMIT AND SAME ARE NOT CAPITAL ASSET IN TERMS OF PROVISIONS OF SECTION 2(14) OF I. T. ACT 1961. B ) CERTIFICATE FROM TALATI OFFICE IS PLACED IN PAPER BOOK & SUBMITTED BEFORE A.O & CIT(A) TO DEMONSTRATE THAT THE AGRICULTURAL LANDS SOLD ARE BEYOND 8 KILOMETERS OF MUNICIPAL LIMIT. (P - 1 & 34) C ) EXTRACT IN FORM 7/12 INDICATE THAT LANDS SOLD ARE DESCRIBED IN REVENUE RECORDS AS AGRICUL TURAL LANDS AND AGRICULTURAL ACTIVITIES ARE CARRIED THERE UPON. THE NATURE OF THE CROP AND AREA UNDER CULTIVATION IS CLEARLY MENTIONED IN THE EXTRACT OF FORM NO.7/12. (P - 26 &58)[VO - 1] D ) ASSESSEE HAS BEEN SHOWING AGRICULTURAL INCOME FROM THE SAID AGRICULTURA L LANDS IN THE PAST AND CURRENT ASSESSMENT YEARS AND THE SAME HAS BEEN ACCEPTED BY REVENUE . E ) ASSESSEE HAS NOT APPLIED FOR CONVERSION OF AGRICULTURAL LANDS FOR NON - AGRICULTURAL PURPOSE. LAND SOLD WAS AGRICULTURAL LAND AT THE TIME OF SALE & PURCHASE. F) THERE IS NO EVIDENCE ON RECORD TO SHOW THAT AGRICULTURAL LANDS 21 SHRI SATISH K. MUNDE SOLD HAVE BEEN PUT TO USE FOR THE PURPOSE OTHER THAN AGRICULTURAL ACTIVITY . 7 . ASSESSEE HAS NOT CARRIED OUT ANY ACTIVITY ON LAND SOLD THAT CONSTITUTE ADVENTURE IN THE NATURE OF TRADE. G ) AGRICULTURE LANDS ARE HELD AS FIXED ASSETS AND NEVER HELD AS BUSINESS ASSETS. ASSESSEE HAS NOT CARRIED OUT ANY ACTIVITY FOR DEVELOPMENT AND TO MAKE THE LAND AS TRADING COMMODITY MARKETABLE 8 . AGRICULTURAL LAND SOLD IS ACQUIRED AND SOLD AS AGRICULTURAL LAND SURPLUS ARISING ON SAME IS NOT EXIGIBLE TO TAX AS INCOME FROM BUSINESS . ON THE DATE OF PURCHASE AND ON THE DATE OF SALE IF THE CHARACTER OF ASSET SOLD IS AGRICULTURAL LAND THE SURPLUS ARISING ON SAME IS NOT EXIGIBLE TO TAX. RELIANCE ON : I) (2015)374 IT R 0531 (BORN.) CIT VS NITISH RAMESHCHANDRA CHORADIA II) ITAT ORDER IN ITA NO 275/NAG/2012 & 175/NAG/2014 FOR ASSTT YEAR 2007 - 08 & 2009 - 10 IN THE CASE OF SMT. SUNITA MANISH SURANA VIDE ORDER DATED 31/05/2016. III) ITAT ORDER IN ITA NO 46/NAG/2013 FOR ASST T YEAR 2009 - 10 IN THE CASE OF SMT MUTUAL TRUST VIDE ORDER DATED 31/07/2015. J ) IT IS RESPECTFULLY SUBMITTED THAT SURPLUS ARISING ON SALE OF AGRICULTURAL LAND IS IN THE NATURE OF AGRICULTURAL INCOME AS PER PROVISION OF SEC.2 (IA) OF I.T ACT 1961 AND THUS SAME IN NOT EXIGIBLE TO TAX RELIANCE ON : - I) (2014) 104 DTR 166(JDTRIB) SUPRIYA KANWAR VS ITO K ) LOSS INCURRED ON SALE OF AGRICULTURAL LAND AT KHASARMARI S.NO 22 CLEARLY INDICATE THAT ASSESSEE IS NOT INVOLVED IN ANY ACTIVITY THAT CONSTITUTE ADVENTURE IN THE NATURE OF TRADE. L ) SURPLUS ARISING ON SALE OF AGRICULTURAL LANDS BEING AGRICULTURAL INCOME ARE NOT ASSESSABLE UNDER HEAD CAPITAL GAIN HENCE PROVISION OF SEC.50C IS NOT APPLICABLE II) GHARKHEDA LAND 22 SHRI SATISH K. MUNDE PURCHASE DEED OF GHARKHEDA LAND DATED 21/04/2006 P - 65 - 80 [VOL - I] SALE DEED OF GHARKHEDA LAND DATED 25/09/2009 P - 81 - 97 [VOL - I] A. ASSESSEE HAS SOLD LAND AT GHARKHEDA AND SHOWN LONG TERM CAPITAL GAIN AND PAID TAXES THEREON. B ) AT PARA 4.3.1 OF ASSTT ORDER A.0 HAS OBSERVED THAT PRIMA FACIE AND IN ISOLATION CLAIM OF LONG TERM CAPITAL GAIN MADE BY ASSESSEE SEEMS TO BE IN ORDER AS THE LAND HAS BEEN HELD BY ASSESSEE FOR MORE THAN 3 YEARS C ) LAND AT GHARKHEDA WAS SHOW AS INVESTMENT IN CAPITAL ASSET IN BALANCE SHEET IS NOT DISPUTED BY A.0 . D) A. 0 HAS NOT BROUGHT ANY MATERIAL EVIDENCE ON RECORD TO SHOW THAT LAND PURCHASED WAS STOCK IN TRADE AND ASSESSEE IS INVOLVED IN ANY ACTIVITY ON LAND SOLD THAT CONSTITUTE ADVENTURE IN THE NATURE OF TRADE. III ) ASSESSEE IS AGRICULTURIST AND ENGAGED IN AGRICULTU RAL ACTIVITY FOR MORE THAN LAST 10 YEARS. 'ASSESSEE HAD REGULARLY SHOWN AGRICULTURAL INCOME FROM AGRICULTURAL LANDS HELD BY ASSESSEE. IN CASE OF ASSESSEE AGRICULTURAL INCOME HAS BEEN ACCEPTED IN REGULAR ASSESSMENT PROCEEDINGS AS FOLLOWS: ASSTT. YEAR ASSESSMENT AGRICULTURAL INCOME 2006 - 07 143(3) ` 19.12 LACS 2002 - 03 143(1) ` 13.95 LACS 23 SHRI SATISH K. MUNDE 9 . THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT THE AGRICULTURAL LANDS ARE LOCATED BEYOND 8 KMS FROM MUNICIPAL LIMIT AND THE SAME ARE NOT CAPITAL ASSET IN TERMS OF THE PROVISIONS OF SECTION 2(14) OF THE ACT. HE SUBMITTED THAT THE CERTIFICATE FROM TALATI OFFICE WHICH IS PLACED IN PAPER BOOK WAS ALSO SUBMITTED BEFORE THE AUTHORITIES BELOW TO DEMONSTRATE THA T THE AGRICULTURAL LANDS SOLD ARE BEYOND 8 KMS. FROM MUNICIPAL LIMIT. THE LEARNED COUNSEL SUBMITTED THAT FORM 7/12 INDICATE S THAT LANDS SOLD ARE DESCRIBED IN REVENUE RECORDS AS AGRICULTURAL LANDS AND AGRICULTURAL AC TIVITIES ARE CARRIED THERE UPON AND T HE NATURE OF THE CROP AND AREA UNDER CULTIVATION IS CLEARLY MENTIONED IN THE EXTRACT OF FORM NO.7/12. HE SUBMITTED THAT THE ASSESSEE HAS BEEN SHOWING AGRICULTURAL INCOME FROM THE SAID AGRICULTURAL LANDS IN THE PAST AND CURRENT ASSESSMENT YEARS AND THE SAME H AS BEEN ACCEPTED BY R EVENUE AUTHORITIES. THE LEARNED COUNSEL SUBMITTED THE ASSESSEE HAS NOT APPLIED FOR CONVERSION OF AGRICULTURAL LANDS FOR NON - AGRICULTURAL PURPOSE. LAND SOLD WAS AGRICULTURAL LAND AT THE TIME OF SALE & PURCHASE. THERE IS NO EVIDENCE ON RECORD TO SHOW THAT AGRICULTURAL LANDS SOLD HAVE BEEN PUT TO USE FOR THE PURPOSE OTHER THAN AGRICULTURAL ACTIVITY . THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT CARRIED OUT ANY ACTIVITY ON LAND SOLD THAT CONSTITUTE S ADVENTURE IN THE NATUR E OF TRADE. THE LEARNED COUNSEL SUBMITTED THAT THE AG RICULTURE LANDS ARE HELD AS FIXED ASSETS AND NEVER HELD AS BUSINESS ASSETS. THE A SSESSEE HAS NOT CARRIED OUT ANY ACTIVITY FOR DEVELOPMENT 24 SHRI SATISH K. MUNDE AND TO MAKE THE LAND AS TRADING COMMODITY MARKETABLE . THE LEARNED COUNSEL SUBMITTED THAT THE A GRICULTURAL LAND SOLD IS ACQUIRED AND SOLD AS AGRICULTURAL LAND SURPLUS ARISING ON SAME IS NOT EXIGIBLE TO TAX AS INCOME FROM BUSINESS ON THE DATE OF PURCHASE AND ON THE DATE OF SALE IF THE CHARACTER OF ASSET SOLD IS AGRICULTUR AL LAND THE SURPLUS ARISING ON SAME IS NOT EXIGIBLE TO TAX . IN SUPPORT OF HIS CONTENTIONS, THE LEARNED COUNSEL FOR ASSESSEE PLACED RELIANCE ON THE FOLLOWING CASE LAWS: I) CIT V/S NITISH R. CHORADIA, [2 - 015] 374 ITR 531 (BOM.); II) SUNITA MANISH SURANA, ITA NO.275/NAG./2012 AND ITA NO.175/NAG. /2014, DATED 31.05.2016; AND III) SMT. MUTUAL TRUST, ITA NO.46/NAG./2013, DATED 31.07.2015. 10 . THE LEARNED COUNSEL FOR ASSESSEE FURTHER SUBMITTED THAT THE SURPLUS ARISING ON SALE OF AGRICULTURAL LAND IS IN THE NATUR E OF AGRICULTURAL INCOME AS PER PROVISIONS OF SECTION 2(1A) OF THE ACT AND THUS SAME IS NOT EXIGIBLE TO TAX. IN SUPPORT OF THIS CONTENTION, THE LEARNED COUNSEL FOR ASSESSEE RELIED ON THE DECISION OF THE JABALPUR BENCH OF THE TRIBUNAL, IN SUPRIYA KANWAR V/S ITO, [2014] 104 DTR 166 (JAB.). THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT THE LOSS INCURRED ON SALE OF AGRICULTURAL LAND AT KHASARMARI S. NO.22, ESTABLISHES THAT THE ASSESSEE IS NOT INVOLVED IN ANY ACTIVITY WHICH CONSTITUTE ADVENTURE IN THE NATURE O F TRADE. THE LEARNED COUNSEL FOR ASSESSEE, WHILE CONCLUDING HIS ARGUMENTS, SUBMITTED THAT THE SURPLUS 25 SHRI SATISH K. MUNDE ARISING ON SALE OF AGRICULTURAL LANDS BEING AGRICULTURAL INCOME ARE NOT ASSESSABLE UNDER THE HEAD CAPITAL GAIN, HENCE, PROVISIONS OF SECTION 50C IS NOT AP PLICABLE. 11 . S O FAR AS GHARKHEDA LAND IS CONCERNED, THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT THE PURCHASE DEED OF GHARKHEDA LAND IS DATED 21 ST APRIL 2006 AND THE SALE DEED OF THE SAME IS DATED 25 TH SEPTEMBER 2009. THE ASSESSEE HAD SOLD THIS LAND AT GH ARKHEDA AND SHOWN LONG TERM CAPITAL GAIN AND PAID TAXES. THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER AT PARA 4.3.1 OBSERVED THAT THE PRIMA FACIE AND IN ISOLATION CLAIM OF LONG TERM CAPITAL GAIN MADE BY THE ASSESSEE IN ORDER AS THE LAND HAS BEEN HELD BY THE ASSESSEE FOR MORE THAN THREE YEARS. HE SUBMITTED THAT THE LAND IN GHARKHEDA WAS SHOWN AS INVESTMENT IN CAPITAL ASSET IN THE BALANCE SHEET IS NOT DISPUTED BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER. T HE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS ALSO NOT BROUGHT ANY MATERIAL EVIDENCE ON RECORD TO SHOW THAT THE LAND PURCHASED WAS STOCK I N TRADE AND THE ASSESSEE IS INVOLVED IN ANY ACTIVITY ON LAND SOLD WHICH CONSTITUTES ADVENTU RE IN THE NATURE OF TRADE. THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT THE ASSESSEE BEING AN AGRICULTURIST AND ENGAGED IN AGRICULTURAL ACTIVITY FOR MORE THAN A DECADE HAD BEEN REGULARLY SHOWN AGRICULTURAL INCOME FROM AGRICULTURAL LANDS WHICH ARE IN POS SESSION OF THE ASSESSEE AND IN THE 26 SHRI SATISH K. MUNDE PAST, THE AGRICULTURAL INCOME SHOWN BY THE ASSESSEE HAS BEEN ACCEPTED IN THE REGULAR COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2006 07 AND 2002 03 FOR ` 19.12 LAKH AND ` 13.95 LAKH RESPECTIVELY. 12 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD IN THE LIGHT OF THE CASE LAWS RELIED UPON BY THE LEARNED COUNSEL FOR ASSESSEE. THE MAIN DISPUTE IN THE PRESENT APPEAL OF THE REVENUE IS WITH REGARD TO THE GROUND RAISED WHICH RELATES TO ASSESSMENT OF SURPLUS DERIVED ON SALE OF AGRICULTURAL LAND AT KHASARMARI S.NO.30 AND 22 AS BUSINESS INCOME AND ALSO SURPLUS DERIVED ON GHARKHEDA LAND (NON AGRICULTURAL LAND) AS BUSINESS INCOME AS AGAINST LONG TERM DECLARED BY THE ASSESSEE. UNDISPUTED FA CTS ARE, THE ASSESSEE HAS DERIVED SURPLUS ON SALE OF KHASARMARI SURVEY NO.30 AGRICULTURAL LAND AT ` 99,44,550 AND A PART OF KHASARMARI SURVEY NO.22 AGRICULTURAL LAND. THE LEARNED COMMISSIONER (APPEALS) HAS CONCLUDED THAT THE ASSESSEE IS NOT LIABLE TO PAY T AX AT IT CANNOT BE ASSESSED AS BUSINESS INCOME FOR THE DETAILED REASONS INDICATED IN THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND THE RELIANCE PLACED ON VARIOUS JUDICIAL PRONOUNCEMENTS AS DISCUSSED IN HIS ORDER. WITH REGARD TO LAND AT GHARKHE DA LAND WHICH IS NON AGRICULTURAL LAND, IT HAS BEEN HELD THAT IT WAS IN THE POSSESSION OF THE ASSESSEE FOR MORE THAN 36 MONTHS AND IT WAS CONTENDED TO BE USED FOR RESIDENTIAL PURPOSES. IT 27 SHRI SATISH K. MUNDE WAS SHOWN AS INVESTMENT IN THE BALANCE SHEET. IT WAS, THEREFORE, CON CLUDED THAT IT IS CAPITAL ASSET AND IS NOT A TRADING ASSET. THUS, THE CONCLUSION OF THE ASSESSING OFFICER TO ASSESS AS BUSINESS INCOME IS NOT JUSTIFIED. PURCHASE DEED AND SALE DEED OF THE PROPERTY SOLD ARE AGRICULTURAL LANDS ARE LOCATED BEYOND 8 KILOMETERS FROM MUNICIPAL LIMIT AND THE SAME ARE NOT CAPITAL ASSET IN TERMS OF PROVISIONS OF SECTION 2(14) OF I. T. ACT 1961. THE CERTIFICATE FROM TALATI OFFICE IS PLACED IN PAPER BOOK & SUBMITTED BEFORE A.O & CIT(A) TO DEMONSTRATE THAT THE AGRICULTURAL LANDS SOLD A RE BEYOND 8 KILOMETERS OF MUNICIPAL LIMIT. (P - 1 & 34). EXTRACT IN FORM 7/12 INDICATE THAT LANDS SOLD ARE DESCRIBED IN REVENUE RECORDS AS AGRICULTURAL LANDS AND AGRICULTURAL ACTIVITIES ARE CARRIED THERE UPON. THE NATURE OF THE CROP AND AREA UNDER CULTIVATIO N IS CLEARLY MENTIONED IN THE EXTRACT OF FORM NO.7/12. (P - 26 &58)[VO - 1]. ASSESSEE HAS BEEN SHOWING AGRICULTURAL INCOME FROM THE SAID AGRICULTURAL LANDS IN THE PAST AND CURRENT ASSESSMENT YEARS AND THE SAME HAS BEEN ACCEPTED BY REVENUE. ASSESSEE HAS NOT APP LIED FOR CONVERSION OF AGRICULTURAL LANDS FOR NON - AGRICULTURAL PURPOSE. LAND SOLD WAS AGRICULTURAL LAND AT THE TIME OF SALE & PURCHASE. F) THERE IS NO EVIDENCE ON RECORD TO SHOW THAT AGRICULTURAL LANDS SOLD HAVE BEEN PUT TO USE FOR THE PURPOSE OTHER THAN A GRICULTURAL ACTIVITY. ASSESSEE HAS NOT CARRIED OUT ANY ACTIVITY ON LAND SOLD WHICH CONSTITUTE ADVENTURE IN THE NATURE OF TRADE. AGRICULTURE LANDS ARE HELD AS FIXED ASSETS AND NEVER HELD AS BUSINESS ASSETS. ASSESSEE HAS NOT CARRIED OUT ANY 28 SHRI SATISH K. MUNDE ACTIVITY FOR DEVE LOPMENT AND TO MAKE THE LAND AS TRADING COMMODITY MARKETABLE. AGRICULTURAL LAND SOLD IS ACQUIRED AND SOLD AS AGRICULTURAL LAND SURPLUS ARISING ON SAME IS NOT EXIGIBLE TO TAX AS INCOME FROM BUSINESS ON THE DATE OF PURCHASE AND ON THE DATE OF SALE IF THE CHA RACTER OF ASSET SOLD IS AGRICULTURAL LAND THE SURPLUS ARISING ON SAME IS NOT EXIGIBLE TO TAX. ON A PERUSAL OF THE ORDER OF THE LEARNED COMMISSIONER (APPEALS), WE FIND THAT THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) IS BASED ON COGENT EVIDENCE AND THE SAME DOES NOT SUFFER FROM ANY FACTUAL OR LEGAL INFIRMITY. THE PROPERTY SOLD IS AGRICULTURAL LAND AT THE TIME OF PURCHASE AND SALE. 13 . LAND AT GHARKHEDA WAS SHOW AS INVESTMENT IN CAPITAL ASSET IN BALANCE SHEET IS NOT DISPUTED BY ASSESSING OFFICER. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL EVIDENCE ON RECORD TO SHOW THAT LAND PURCHASED WAS STOCK IN TRADE AND ASSESSEE IS INVOLVED IN ANY ACTIVITY ON LAND SOLD THAT CONSTITUTE ADVENTURE IN THE NATURE OF TRADE. 14 . T HE HONBLE BOMBAY HIGH COURT IN CIT V/S NITISH R. CHOR DIA (SUPRA) , HAS HELD THAT ANY CONSIDERATION RECEIVED OUT OF SALE OF THE AGRICULTURAL LAND CANNOT BE TREATED AS BUSINESS INCOME FOR THE PURPOSE OF INCOME TAX. SIMILARLY, THE JODHPUR BENCH OF THE TRIBU N AL, IN SUPRIYA KANWAR V/S ITO, [2 014] 149 ITD 001 (JU.) HAS HELD THAT THE LAND SITUATED OUTSIDE MUNICIPAL LIMITS WOULD BE EXCLUDED FROM EXPRESSION 29 SHRI SATISH K. MUNDE CAPITAL ASSET AND SALE PROCEEDS WOULD BE TREATED AS REVENUE RECEIPT FROM AGRICULTURAL LAND. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD N OT ADDUCE ANY EVIDENCE CONTRARY TO THE SUBMISSIONS OF THE LEARNED COUNSEL FOR ASSESSEE AND HAS NOT PLACED ANY CONTRARY DECISION EITHER. WE ALSO HOLD THAT THE LAND AT GHAARKHEDA LAND (NON AGRICULTURAL LAND) IS HELD FOR MORE THAN 36 MONTHS AND, HENCE, IS CAP ITAL ASSETS AT THE HANDS OF THE ASSESSEE. THERE IS NO EVIDENCE ON RECORD TO HOLD THAT THE SAME IS STOCK IN TRADE SO THAT THE SAME IS ASSESSED AS BUSINESS INCOME. CONSEQUENTLY, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) WARRANTING OUR INTERFERENCE IN THE SAME. SINCE THE ISSUE BEFORE US IS SQUARELY COVERED BY THE AFORESAID DECISION OF THE HONBLE BOMBAY HIGH COURT AND BY THE TRIBUN AL, JODHPUR BENCH (SUPRA), RESPECTFULLY FOLLOWING THE SAME WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) BY DISMISSING THE GROUNDS RAISED BY THE REVENUE. 15 . IN THE RESULT, REVENUES APPEAL FOR A.Y. 2010 11 STANDS DISMISSED. ORDER PRONOUNCED IN TH E OPEN COURT ON 31 .03.2017 SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER SD/ - RAM LAL NEGI JUDICIAL MEMBER NAGPUR, DATED: 31 .03.2017 30 SHRI SATISH K. MUNDE COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, NAGPUR CITY CONCERNED; ( 5 ) THE DR, ITAT, NAGPUR; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, NAGPUR