DCIT, Central Circle-4, Hyderabad V. Sri Potla Nishanth, Khammam

ITA 1568/HYD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5944 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-01-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 30-08-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: A V RAGHURAM
• Keywords: Capital asset; Search and seizure
• Section: 54B; 2(14); 32; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER SL. NO. ITA NO. AY APPELLANT RESPONDENT 1. 1529/H/11 2007-08 DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 4, HYDERABAD KUM. POTLA SHANTHI, KHAMMAM PAN APEPP2329E 2. 1531/H/11 2008-09 -DO- SHRI POTLA NISHANTH, KHAMMAM PAN APEPP2330R 3. 1568/H/11 2007-08 -DO- -DO- REVENUE BY: SHRI B. KURMI NAIDU ASSESSEE BY: SHRI A.V. RAGHURAM DATE OF HEARING: 28/01/2016 DATE OF PRONOUNCEMENT: 11/03/2016 O R D E R PER BENCH: VIDE COMMON ORDER DATED 22.03.2012, THE INCOME TAX APPELLATE TRIBUNAL B BENCH, HYDERABAD, CONSIDERED AND RESTORED THE ISSUE OF CAPITAL GAINS TO THE ASSESSING OFFICER FOR RE-EXAMINATION OF THE ENTIRE ISSUE AFRESH, ON THE GROUND THAT IT I S NOT CLEAR AS TO WHETHER THE ASSESSEE HAS CONVERTED THE LAND FOR NON -AGRICULTURAL PURPOSES. 2. THE ABOVE APPEALS WERE REHEARD ON THE DIRECTION OF THE HONBLE HIGH COURT VIDE JUDGMENT DATED 5 TH SEPTEMBER, 2013 IN ITTA NO. 394 OF 2013, IN THE CASE OF SRI POTLA NISH ANTH IN ITA NO. 1568/HYD/11 AND VIDE JUDGEMENT DATED 11/09/2013 IN ITTA NO. 402 I.T.A. NOS. 1529, 1531 & 1568/HYD/2011 KUM. POTLA SHANTHI & SHRI POTLA NISHANTH 2 OF 2013 IN THE CASE OF POTLA SHANTI IN ITA NO. 1529 /HYD/2011 AND JUDGEMENT DATED 10/09/13 IN ITTA NO. 398 OF 2013 IN THE CASE OF POTLA NISHANTH IN ITA NO. 1531/HYD/2011. THE HON'B LE HIGH COURT REMANDED THE MATTER BACK TO THE ITAT, IN ALL THE TH REE APPEALS, WITH A DIRECTION TO GIVE REASONABLE OPPORTUNITY OF HEAR ING TO THE ASSESSEE, BEFORE DECIDING THE APPEAL OF THE REVENUE ON MERITS, WHETHER FOR REMANDING THE MATTER TO THE ASSESSING O FFICER OR OTHERWISE. THE OBSERVATIONS OF THE HONBLE HIGH COU RT ARE AS UNDER: WE HAVE HEARD MR. K. VASANT KUMAR, LEARNED SENIOR COUNSEL APPEARING FOR THE APPELLANT AND THE LEARNED COUNSE L FOR THE RESPONDENT. WE HAVE GONE THROUGH THE IMPUGNED JUDG MENT AND ORDER OF THE LEARNED TRIBUNAL. IT APPEARS, THE LEARNED TRIBUNAL HAS SO TO SAY REM ANDED THE MATTER FOR DETERMINATION OF THE NATURE OF THE LAN D, NAMELY, WHETHER THE LAND IS AN AGRICULTURAL LAND OR NOT W ITHOUT, GIVING A CHANCE OF HEARING TO THE APPELLANT. FROM THE IM PUGNED JUDGMENT AND ORDER OF THE LEARNED TRIBUNAL, IT DO ES NOT APPEAR THAT ANY SUCH CONTENTION WAS RAISED BY ANY OF THE PARTIES OR IT WAS CONSIDERED ON THE QUESTION OF RE MAND. UNDER THE CIRCUMSTANCES, WE KEEP THAT PORTION OF T HE IMPUGNED JUDGMENT AND ORDER OF THE LEARNED TRIBUN AL ONLY, IN ABEYANCE AND WE DIRECT THE LEARNED TRIBUNAL TO HE AR THE APPELLANT ON THE QUESTION OF NECESSITY OF REMAND FOR DETERMINATION OF THE NATURE OF THE LAND. AFTER HE ARING THE APPELLANT, THE LEARNED TRIBUNAL SHALL PASS A FRESH ORDER EITHER REVERSING OR RETAINING EARLIER ORDER. THIS EXERCIS E SHALL BE COMPLETED WITHIN A PERIOD OF SIX WEEKS FROM THE DA TE OF PRODUCTION OF THIS ORDER. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE FATH ER OF ASSESSEE, SRI POTLA NAGESWARA RAO HAD PURCHASED 21.27 ACRES O F LAND AT BOWRAMPET, DUNDIGAL VILLAGES OF QUTBULLAPUR MUNICIP ALITY DURING THE FY 2003-04 IN THE NAME OF HIS SON POTLA NISHANTH AN D DAUGHTER POTLA SHANTHI. OUT OF THIS LAND, 13 ACRES WAS GIVEN FOR DEVELOPMENT TO M/S AMSRI DEVELOPERS IN THE YEAR 2007 AGAINST CO NSIDERATION OF 35% OF CONSTRUCTED AREA. SRI POTLA NAGESWARA RAO, F ATHER OF THE ASSESSEE, HAS SOLD 6.25 ACRES OF LAND TO M/S VARUN CONSTRUCTIONS. I.T.A. NOS. 1529, 1531 & 1568/HYD/2011 KUM. POTLA SHANTHI & SHRI POTLA NISHANTH 3 3.1 THE AO OBSERVED AS FOLLOWS: IT IS SEEN THAT THE ASSESSEE HAS SHOWN PROFIT ON SA LE OF 1.25 ACRES OF THIS LAND AT RS. 15591203 IN THE CAPI TAL ACCOUNT. HOWEVER, NO CAPITAL GAINS WAS OFFERED CLAIMING IT TO BE AN AGRICULTURAL LAND. SINCE THE TRANSACTIONS OF HANDING OVER THE LAND FOR DEVELOPME NT AND SALE OF LAND TOOK PLACE IN THE SAME YEAR, AND O UT OF THE SAME STRETCH OF 21.27 ACRES OF LAND, THE ASSESS EES ARGUMENT THAT THE LAND IS PARTLY AGRICULTURAL AND P ARTLY EXPLOITED FOR DEVELOPMENT OF RESIDENTIAL PURPOSE IS NOT AT ALL TENABLE. 3.2 THERE WAS A SEARCH AND SEIZURE OPERATION U/S 1 32 OF THE IT ACT 1961 CONDUCTED IN THE CASE OF SRI POTLA NAGE SWARA RAO WHEREIN CERTAIN DOCUMENTS WERE FOUND AND SEIZED. CONSEQUENT TO THE SEARCH OPERATION THE ASSESSEES C ASE IS ALSO NOTIFIED WITH DCIT CENTRAL CIRCLE 4 HYDERABAD SINCE THE ASSESSEE HAPPENED TO BE THE DAUGHTER OF SRI POTLA N AGESWARA RAO. THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER BASED ON THE MATERIAL AVAILABLE ON RECORD. 3.3 AO HELD THAT SINCE ASSESSEE HAS ALREADY ENTERE D INTO DEVELOPMENT AGREEMENT FOR A PART OF THE LAND FOR RE SIDENTIAL USE, SHE CANNOT CLAIM AGRICULTURAL STATUS FOR THE ADJACENT CHUNK OF LAND. HENCE AO DID NOT ACCEPT THE ASSESSE ES ARGUMENT AND SUBJECTED THE TRANSACTION TO CAPITAL G AINS TAX. ASSESSING OFFICER, ON A COMPLETE ANALYSIS OF ALL THE FACTS OF THE CASE, AND CONDUCT OF THE ASSESSEE FROM THE TIME OF PURCHASE OF LAND TO ITS SALE IN THE LIGHT OF THE EC ONOMIC SCENARIO OF THE HYDERABAD CITY DURING THE PERIOD, H ELD THAT IT IS CLEAR THAT THE ASSESSEE HAD NOT PURCHASED THE LA ND WITH AN INTENTION TO DO AGRICULTURE ON IT. INSTEAD THE LAN D WAS PURCHASED WITH THE ONLY INTENTION OF SELLING IT AT A PROFIT IN THE BOOMING ECONOMY OF HYDERABAD. THE AO TOOK THE SALE PROCEEDS AT RS 1.62 CRORES AND REDUCED THE COST OF I.T.A. NOS. 1529, 1531 & 1568/HYD/2011 KUM. POTLA SHANTHI & SHRI POTLA NISHANTH 4 ACQUISITION OF RS 4.80 LAKHS AND BALANCE AMOUNT OF RS 1,57,20,000 WAS TREATED AS STCG FOR THE RELEVANT AS SESSMENT YEAR. 3.4 ON APPEAL, THE CIT(A) ALLOWED THE APPEAL OF TH E ASSESSEE HOLDING AS UNDER: THE SUBMISSION MADE BY THE AUTHORIZED REPRESENTATI VE HAS BEEN TAKEN INTO CONSIDERATION. THE CASE LAWS RE LIED UPON BY THE AUTHORIZED REPRESENTATIVE ARE PERUSED. THE OBSERVATION OF THE ASSESSING OFFICER ALSO HAS BEEN VERIFIED. HAVING VERIFIED THE FACTS AND CIRCUMSTANC ES OF THE CASE AND ALSO THE COPY OF REVENUE RECORDS AND REPORTS FURNISHED BY THE ASSESSEE I AM OF THE VIEW THAT THE ADDITION MADE BY THE ASSESSING OFFICER TREATING THE SALE OF AGRICULTURAL LAND FOR SHORT TERM CAPITAL GA IN PURPOSE CANNOT BE SUSTAINED, THEREFORE THIS GROUND OF APPEAL IS ALLOWED. 4. WHEN THE MATTER CAME TO ITAT IN APPEALS BY THE R EVENUE, THE ITAT FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SMT. GOUSIA BEGUM AND OTHER S, VIDE ORDER DATED 16.1.2012 IN ITA NO. 1024/HYD/2011 AND OTHERS REMITTED THE ISSUE TO THE FILE OF THE AO BY OBSERVING AS UNDER: IN THESE CIRCUMSTANCES, WE DEEM IT FIT TO RESTORE THE ISSUE TO THE FILE OF THE AO FOR RE-EXAMINATION OF THE ENTIRE ISSUE AFRESH, IN THE LIGHT OF THE FINDING S GIVEN IN THE CASE OF SMT. GHOUSIA BEGUM CITED SUPRA, AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE, DULY VERIFYING THE NATURE OF LAND I.E., WHETHER THE LAND CAN BE CLASSIFIED AS AGRICULTURE LAND AND ALSO BEYOND 8 KMS. OF ANY MUNICIPALITY. 5. AGGRIEVED BY THE ORDER OF THE TRIBUNAL, THE ASS ESSEE PREFERRED APPEALS BEFORE THE HON'BLE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH. (FORMERLY HIGH COURT OF JUDICATURE OF ANDH RA PRADESH AT HYDERABAD) 6. HAVING REGARD TO THE DIRECTION GIVEN BY THE HON 'BLE HIGH COURT, THE MATTER WAS POSTED FOR HEARING. THE LEARN ED COUNSEL I.T.A. NOS. 1529, 1531 & 1568/HYD/2011 KUM. POTLA SHANTHI & SHRI POTLA NISHANTH 5 APPEARING ON BEHALF OF THE ASSESSEE MR. A.V. RAGHUR AM SUBMITTED THAT THE RELEVANT DOCUMENTS WERE SUBMITTED BEFORE T HE CIT(A) STATING THAT THE LAND SOLD BY THE ASSESSEE IS AGRIC ULTURAL LAND AND ALSO THAT IT IS SITUATED BEYOND 8 KMS FROM THE LIM ITS OF THE MUNICIPALITY AS PRESCRIBED U/S 2(14) OF THE ACT AND HENCE, THE INCOME FROM THE TRANSFER OF LAND WILL CONSTITUTE A GRICULTURAL INCOME AND IT IS NOT EXIGIBLE TO CAPITAL GAIN TAX. IT IS SUBMITTED THAT THE TRIBUNAL HAS EXPRESSED THAT IT IS NOT CLEAR AS TO W HETHER THE ASSESSEE HAS CONVERTED THE LAND FOR NON-AGRICULTURA L PURPOSES. THE TRIBUNAL RELYING ON THE DECISION OF GOUSIA BEGUM AN D OTHERS VIDE ITS ORDER DATED 16/01/2012 IN ITA NO. 1024/HYD/2011, DE EMED IT FIT AND PROPER TO RESTORE THE ISSUE TO THE FILE OF THE ASSE SSING OFFICER FOR RE- EXAMINATION OF THE NATURE OF THE LAND TRANSFERRED. HE SUBMITTED THAT THE ISSUE INVOLVED IN THE CASE OF SMT. GOUSIA BEGUM WAS RELATING TO SECTION 54B AND MOREOVER THE LAND WAS SITUATED WITH IN THE MUNICIPAL LIMITS. THEREFORE, THE ABOVE CASE WAS DISTINGUISHAB LE FROM THE FACTS OF THE PRESENT CASE UNDER CONSIDERATION. LD. AR SUB MITTED THAT THE REVENUE HAS NOT RAISED ANY GROUND TO QUESTION THE N ATURE OR THE PURPOSE OF THE LAND TRANSFERRED BY THE ASSESSEE. HE NCE, THE FINDING OF THE TRIBUNAL ON THIS ISSUE IS AGAINST THE INTERE ST OF THE ASSESSEE. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMITTED THAT THE REVENUE HAS RAISED GROUND NO. 2 AS BELOW: THE LD. CIT(A) HAS ERRONEOUSLY HELD THAT AS THE LAN D IS SITUATED 13 KMS AWAY FROM THE MUNICIPAL LIMITS, TH E SALE DOES NOT ATTRACT STGC, IGNORING THE FACT THAT THE SAID LAND IS GIVEN FOR DEVELOPING OF TOWNSHIP, THE LAND LOSES ITS CHA RACTER AS AN AGRICULTURAL LAND HENCE STCG ATTRACTS. ACCORDING TO THE LD. DR, IN THE ABOVE GROUND, THE W ORD CHARACTER WAS USED PROPERLY, WHICH ALSO MEANT NATURE OR THE P URPOSE OF THE LAND TRANSFERRED. HE SUBMITTED THAT THE HONBLE TRI BUNAL HAS RIGHTLY ADDRESSED THESE POINTS AND REFERRED THE MATTER BACK TO THE ASSESSING OFFICER. I.T.A. NOS. 1529, 1531 & 1568/HYD/2011 KUM. POTLA SHANTHI & SHRI POTLA NISHANTH 6 8. CONSIDERING THE SUBMISSIONS OF BOTH THE COUNSEL S AND FACTS ON RECORD, IT IS OBSERVED THAT THE ASSESSING OFFICER A FTER COMPLETE ANALYSIS OF THE FACTS OF THE PRESENT CASE AND CONDU CT OF THE ASSESSEE FROM THE TIME OF PURCHASE OF LAND TO ITS S ALE AND ALSO IN THE LIGHT OF THE ECONOMIC SCENARIO OF THE HYDERABAD CITY DURING THE PERIOD, HELD THAT THE ASSESSEE HAD NOT PURCHASED TH E LAND WITH AN INTENTION TO DO AGRICULTURAL OPERATIONS ON IT, INST EAD, THE LAND WAS PURCHASED ONLY WITH AN INTENTION OF SELLING IT AT P ROFIT IN THE BOOMING ECONOMY OF HYDERABAD. ACCORDINGLY, ASSESSING OFFICE R TREATED THE INCOME ARISING FROM THE TRANSFER OF THE ABOVE LAND AS STCG AND APPLIED CAPITAL GAINS TAX. WE HAVE GONE THROUGH THE RELEVANT DOCUMENTS FILED BY THE ASSESSEE BEFORE THE ASSESSIN G OFFICER AND CIT(A) AND FIND THAT THE ASSESSEE HAD FILED VILLAG E ADMINISTRATIVE OFFICER (VAO) CERTIFICATES RELATING TO AGRICULTURE INCOME, TYPE OF SEEDS GROWN AND DISTANCE OF LAND FROM THE MUNICIPAL ITY DURING THE RELEVANT AY. THESE DOCUMENTS AND INFORMATION PROVID ED BY THE ASSESSEE NEEDS VERIFICATION AND VETTING. THE TRIBUN AL WAS NOT IN A POSITION TO DO THE SAME AS MOST OF THESE CRITICAL D OCUMENTS WERE SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A) AND NOT BEFORE THE ASSESSING OFFICER. WE ARE OF THE VIEW THAT THESE DO CUMENTS NEED VERIFICATION BY THE ASSESSING OFFICER FOR DETERMINA TION OF BOTH THE NATURE OF THE LAND TRANSFERRED AND THE DISTANCE OF LAND FROM THE MUNICIPALITY. IN OUR VIEW, IT IS JUST AND EQUITABLE TO GO BACK TO THE FILE OF ASSESSING OFFICER FOR PROPER INVESTIGATION AND EVALUATION AT THE GROSS ROOT. HENCE, WE REMIT THIS ISSUE TO THE F ILE OF THE ASSESSING OFFICER FOR RECONSIDERATION IN ACCORDANCE WITH LAW. 9. AS THE FACTS IN ITA NO. 1529/HYD/2011 ARE SIMILA R TO THE FACTS IN ITA NO. 1531 & 1561/HYD/2011, THE SAME IS ALSO R EMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. I.T.A. NOS. 1529, 1531 & 1568/HYD/2011 KUM. POTLA SHANTHI & SHRI POTLA NISHANTH 7 10. IN THE RESULT, THE APPEALS UNDER CONSIDERATION ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 11 TH MARCH, 2016 SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER SD/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER HYDERABAD, DATED 11 TH MARCH , 2016 KV COPY FORWARDED TO: 1. POTLA SHANTI, 11-3-119, NEHRU NAGAR, KHAMMAN 2. SHRI POTLA NISHANTH, 11-3-119, NEHRU NAGAR, KHAMMAN 3. DCIT, CENTRAL CIRCLE 4 8 TH FLOOR, AAYAKAR BHAVAN, L.B. STADIUM ROAD, BASHEERBAGH, HYDERABAD 500 004 4 CIT(A) VII, HYDERABAD 5 CIT (CENTRAL), HYDERABAD 6 THE DR, ITAT, HYDERABAD