DCIT., Circle-6(1), Hyderabad, Hyderabad V. Smt D Jyothishmathi, Hyderabad

ITA 1778/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91647 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 26-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Capital asset; Business income
• Section: 143(3); 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.1778/HYD/2014 ASSESSMENT YEAR 2007-2008 THE DCIT, CIRCLE 6(1) HYDERABAD. VS. SMT. D. JYOTHISHMATHI HYDERABAD. PAN AGVPD2399A (APPELLANT) (RESPONDENT) FOR REVENUE : MR. RAJAT MITRA FOR ASSESSEE : MR. V. RAGHAVENDRA RAO DATE OF HEARING : 06.05.2015 DATE OF PRONOUNCEMENT : 13.05.2015 ORDER PER P.M. JAGTAP, A.M. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-IV, HYDERABAD DATED 12. 09.2014 AND THE GROUNDS RAISED BY THE REVENUE THEREIN READ AS UNDER : 1. THE LEARNED CIT(APPEALS) ERRED BOTH IN LAW AND ON FACTS OF THE CASE. 2. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FACT T HAT THE ASSESSING OFFICER HAS BROUGHT ON RECORD ALL THE INFORMATION TO SHOW THAT THE TRANSACTION IS ADVENTU RE IN THE NATURE OF TRADE AND THE INCOME ARISING WAS RIGH TLY ASSESSED TO TAX UNDER THE HEAD 'INCOME FROM THE BUS INESS U/S.28 OF THE ACT. 3. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE LAND I S AGRICULTURAL LAND WITHOUT REMANDING THE MATTER TO T HE ASSESSING OFFICER FOR VERIFICATION WHEN THE ASSESSE E HAS NOT PRODUCED ANY EVIDENCE IN SUPPORT OF AGRICULTURA L ACTIVITY CONDUCTED IN THE LAND. 2 ITA.NO.1778/HYD/2014 SMT. D. JYOTHISHMATHI, HYDERABAD. 4. THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT T HE ASSESSING OFFICER HAS DISCUSSED THE ISSUE OF TREATM ENT OF LAND (WHETHER AGRICULTURAL OR NOT) AT LENGTH, ON TH E GUIDELINES DISCUSSED BY HON'BLE SUPREME COURT OF IN DIA IN THE CASE OF SARIFABIBI MOHAMMAD VS CIT. 5. ANY OTHER GROUND(S) THAT MAY BE URGED AT THE TIME O F HEARING. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDU AL WHO FILED HER RETURN OF INCOME FOR THE YEAR UNDER C ONSIDERATION ON 30.07.2007 DECLARING TOTAL INCOME OF RS.1 LAKH. THE SAID RETURN WAS INITIALLY PROCESSED BY THE A.O. UNDER SE CTION 143(1) OF THE ACT. THEREAFTER, CONSEQUENT TO THE SEARCH AN D SEIZURE OPERATION CONDUCTED IN THE CASES OF MR. VENEGALLA A NAND PRASAD GROUP ON 07.10.2009, A NOTICE UNDER SECTION 153C OF THE ACT WAS ISSUED BY THE A.O. TO THE ASSESSEE ON 0 4.05.2012. IN RESPONSE TO THE SAID NOTICE, THE RETURN OF INCOM E FOR THE YEAR UNDER CONSIDERATION WAS FILED BY THE ASSESSEE ON 13 .12.2012 DECLARING TOTAL INCOME OF RS.1,16,917 INCLUDING INC OME FROM OTHER SOURCES OF RS.16,917. AS NOTICED DURING THE C OURSE OF SEARCH CONDUCTED IN THE CASES BELONGING TO MR. VENE GALLA ANAND PRASAD GROUP, THE ASSESSEE HAD SOLD A PLOT OF LAND LOCATED AT DUNDIGAL (V), QUTUBULLAPUR (M), RANGA RE DDY DISTRICT TO M/S. VARUN CONSTRUCTION FOR A SUM OF RS . 1 CRORE UNDER AN AGREEMENT OF SALE WITH POSSESSION CUM IRRE COVERABLE GENERAL POWER OF ATTORNEY ON 12.03.2007. AS CLAIMED BY THE ASSESSEE, THE SAID LAND WAS AGRICULTURAL LAND IN TE RMS OF SECTION 2(14)(III) AND SINCE IT WAS LOCATED AT DUND IGAL (V) BEYOND 8 KM OF ANY MUNICIPALITY AND SHE HAD CARRIED OUT AGRICULTURAL OPERATION ON THE SAID LAND, THE SALE T HEREOF DID NOT GIVE RISE TO ANY CAPITAL GAIN CHARGEABLE TO TAX IN HER HANDS. THIS CLAIM OF THE ASSESSEE WAS EXAMINED BY THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN THE COURSE OF SUCH 3 ITA.NO.1778/HYD/2014 SMT. D. JYOTHISHMATHI, HYDERABAD. EXAMINATION, HE GOT ENQUIRIES MADE THROUGH HIS INSP ECTOR WHO REPORTED THAT THERE WAS NO AGRICULTURAL ACTIVITY ON THE DATE OF ENQUIRY I.E., 12.12.2013 OR EVEN IN THE IMMEDIATE P AST. HE ALSO REPORTED THAT THE CONCERNED LAND DID NOT APPEAR CON DUCIVE FOR AGRICULTURE. THE A.O. ALSO FOUND THAT THERE WAS NO EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF HER CLAIM OF HAVING CARRIED ON ANY AGRICULTURAL ACTIVITY. HE ALSO NOTED THAT NO AGRICULTURAL INCOME HAD BEEN DECLARED BY THE ASSESS EE IN HER RELEVANT RETURNS OF INCOME. HE FURTHER NOTED THAT T HE LAND IN QUESTION ALONG WITH NEIGHBOURING LANDS ADJACENT TO THE URBAN AGGLOMERATION AROUND THE CITY OF HYDERABAD HAD BEEN BOUGHT BY THE ASSOCIATES OF M/S. AMSRI DEVELOPERS. ACCORD ING TO THE A.O., IT WAS THUS CLEAR THAT THE ASSESSEE HAD INVES TED IN THE LAND KEEPING IN MIND RISE IN REAL ESTATE MARKET AND THE ACTIVITY BEING DEVELOPED IN THE ADJOINING AREAS. HE HELD THA T THE ASSESSEE THUS HAD CARRIED OUT AN ADVENTURE IN THE N ATURE OF TRADE AND THE PROFIT OF RS.97,20,000 ARISING FROM T HE PURCHASE AND SALE OF LAND WAS CHARGEABLE TO TAX IN HER HANDS AS BUSINESS INCOME. ACCORDINGLY THE AMOUNT OF RS.97,20 ,000 WAS ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSEE AS BUSINESS INCOME IN THE ASSESSMENT COMPLETED UNDER SECTION 14 3(3) READ WITH SECTION 153C VIDE ORDER DATED 25.03.2013. 3. AGAINST THE ORDER PASSED BY THE A.O. UNDER SECT ION 143(3) READ WITH SECTION 153C, AN APPEAL WAS PREFER RED BY THE ASSESSEE BEFORE THE LD. CIT(A) WHO IDENTIFIED THE T HREE ISSUES INVOLVED FOR CONSIDERATION IN ASSESSEES CASE AND D ECIDED THE SAME AS UNDER : WHETHER THE TRANSACTION WAS AN ADVENTURE IN THE NAT URE OF TRADE ? 4 ITA.NO.1778/HYD/2014 SMT. D. JYOTHISHMATHI, HYDERABAD. 7. THE ASSESSING OFFICER HAD NOTED IN HIS ORDER T HAT THE APPELLANT HAD ALSO DISCLOSED STCG ON SALE OF PROPERTY AT DESHMUKH VILLAGE IN AY 2007-08 AND ON SALE OF LAND IN KRISHNA DISTRICT IN AY 2006-07 WHICH SHOWED THAT THE APPELLANT WAS FREQUENTLY ENGAGED IN BUYING AND SELLING OF LAND. IT IS TRUE T HAT THE APPELLANT HAS SOLD THESE LANDS. HOWEVER, MERELY TWO TRANSACTIONS OF SALE CANNOT TURN THE APPELLANT INTO A REAL ESTATE DEALER. THERE IS NO EVIDENCE OF ANY DEVELOPMENT ACTIVITY HAVING BEEN UNDERTAKEN ON THE LAND IN QUESTION OR OF THE LAND BEING SOLD AFTER PLOTTING WHICH WOULD SUGGEST AN INTENTION TO UNDERTAKE A BUSINESS ACTIVITY. THE MER E FACT THAT THE LAND PRICES MAY HAVE ESCALATED IN THE VICINITY WHICH THE APPELLANT HAS TAKEN ADVANTAGE OF OR THAT OTHER LANDOWNERS IN THE VICINITY MAY ALSO SIMULTANEOUSLY HAVE TAKEN ADVANTAGE OF, CANNOT LEAD TO A CONCLUSION OF 'A SYSTEMATIC ACTIVITY AMOUNTING TO AN ADVENTURE IN THE NATURE OF TRADE'. I, THEREFORE, HOLD THAT THE TRANSACTION OF SALE OF LAN D AT DUNDIGAL WAS NOT AN ADVENTURE IN THE NATURE OF TRADE. WHETHER THE LAND SOLD BY THE ASSESSEE WAS AGRICULTU RAL AND ? 12. IN THE CASE OF M. VIJAYA AND OTHERS, THE ASSESSEES HAD SOLD LAND LOCATED AT DUNDIGAL VILLAGE FALLING WITHIN QUTBULLAPUR MANDAL TO VARUN CONSTRUCTIONS. THE ITAT TOOK NOTE OF THE FACTS THAT THE LAND WAS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL LAND, THAT THE NATURE OF THE CROP AND THE PERSON WHO HAD CULTIVATED IT HAD BEEN MENTIONED IN THE REVENUE RECORDS WHICH SHOWED THAT THE LAND WAS USED FOR AGRICULTURAL USE AT THE RELEVANT POINT OF TIME, THA T THERE WAS NO DEVELOPMENTAL ACTIVITY IN THE SURROUNDING AREA AT THE TIME OF SALE (FALLING IN TH E AY 2007-08) AND THAT THERE WAS NO APPLICATION FOR CONVERSION OF THE LAND INTO NON-AGRICULTURAL USE PRIOR TO THE SALE. THE ITAT, THEREFORE, CONCLUDED THAT THE LAND IN QUESTION HAD TO BE HELD AS AGRICULTURAL LAND. 13. THE ITAT HAD TAKEN A SIMILAR VIEW IN THE CASE O F BHAVYA CONSTRUCTIONS P. LTD. THE LAND IN THIS CASE WAS LOCATED AT BOWRAMPET VILLAGE, UNDER. 5 ITA.NO.1778/HYD/2014 SMT. D. JYOTHISHMATHI, HYDERABAD. QUTBULLAPUR MANDAL AND HAD ALSO BEEN SOLD TO VARUN CONSTRUCTIONS. THE ITAT HAD HELD THAT THE ASSESSING OFFICER HAD NOT BEEN JUSTIFIED IN REJECTING THE MRO CERTIFICATE AND ENTRIES IN THE PAHANIS WITHOUT PROPER EVIDENCE. 14. THE FACTS IN THE APPELLANT'S CASE ARE IDENTICA L. THE LAND WAS LOCATED AT DUNDIGAL VILLAGE FALLING WITHIN QUTBULLAPUR MANDAL. THE LAND WAS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL LAND. THE APPELLANT WAS IN POSSESSION OF PATTADAR PASSBOOKS. THE NATURE OF THE CROP AND OTHER DETAILS WERE SPECIFIED IN THE PAHANIS. THE LAND WAS SOLD AT THE SAME TIME AS THAT IN THE CASE OF M. VIJAYA. THE LAND WAS DESCRIBED AS AGRICULTURAL IN THE SALE DEEDS, BOTH WHILE PURCHASING AND SELLING THE LAND. BASED ON THIS EVIDENCE AND FOLLOWING THE RATIO OF THE DECISION DISCUSSED ABOVE, IT IS HELD THAT THE LAND WAS AGRICULTURAL LAND. WHETHER THE LAND WAS LOCATED WITHIN A DISTANCE OF 8 KM FROM THE MUNICIPAL LIMITS OF HYDERABAD ? 8. THE APPELLANT HAD FURNISHED A CERTIFICATE ISSU ED BY THE DEPUTY COLLECTOR & TAHSILDAR, QUTBULLAPUR MANDAL, R. R. DISTRICT TO THE EFFECT THAT THE LAND IN QUESTION WAS LOCATED AT A DISTANCE OF 14 KMS FROM THE LOCAL LIMITS OF HYDERABAD MUNICIPAL CORPORATION . IN VIEW OF THIS CERTIFICATE, THE CLAIMS OF THE APPE LLANT ON THIS ISSUE IS ACCEPTED. 3.1. THE LD. CIT(A) THUS HELD THAT THE LAND IN QUE STION BEING AGRICULTURAL LAND LOCATED MORE THAN 8 KM FROM THE LIMITS OF HYDERABAD MUNICIPAL CORPORATION WAS NOT A CAPITA L ASSET AS DEFINED UNDER SECTION 2(14) AND THE PROFITS ARISING FROM ITS TRANSFER WAS NOT CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE AS CAPITAL GAINS. HE ALSO HELD THAT THE TRANSACTION WAS NOT AN ADVENTURE IN THE NATURE OF TRADE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL B EFORE THE TRIBUNAL. 6 ITA.NO.1778/HYD/2014 SMT. D. JYOTHISHMATHI, HYDERABAD. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. T HE LEARNED REPRESENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL OF THE REVENUE IS SQ UARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE COMMON ORD ER DATED 06.06.2014 PASSED BY THE COORDINATE BENCH OF THIS T RIBUNAL IN THE CASE OF SMT. M. VIJAYA AND OTHERS (ITA.NO.806/H /13 ETC.) WHEREIN A SIMILAR ISSUE IS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. A COPY OF THE SAID ORDER OF THE TRIBU NAL IS ALSO PLACED ON RECORD BEFORE US AND PERUSAL OF THE SAME SHOWS THAT AFTER DISCUSSING ALL THE RELEVANT ASPECTS OF THE MA TTER IN DETAIL IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS, TH E TRIBUNAL HAS SUMMARIZED ITS CONCLUSIONS IN PARAGRAPH NOS. 36 AND 37 OF ITS ORDER AS UNDER: 36. IN VIEW OF OUR ABOVE DISCUSSION, IN OUR OPINION, THE LAND IS NOT SITUATED WITHIN THE QUTUBULLAPUR MUNICIPALITY, BUT, THE SAME SITUATED IN THE DUNDIGAL VILLAGE AND THE EVIDENCE BROUGHT ON RECORD SUGGEST THAT THE LAND IS AN AGRICULTURAL LAND, HENCE, IT IS NOT LIABLE FOR TAXATION. ACCORDINGLY, THE ADDITION MADE ON THIS COUNT IS DELETED IN ALL THE APPEALS UNDER CONSIDERATION. NO EVIDENCE SUGGESTS THAT DUNDIGAL VILLAGE FALLS WITHIN QUTUBULLAPUR MUNICIPALITY AND ALSO THIS QUTUBULLAPUR MUNICIPALITY HAS NOT NOTIFIED IN THE YEAR UNDER SECTION 2(14)(III) OF THE I.T. ACT AND QUTUBULLAPUR MUNICIPALITY ABOLISHED AND MERGED WITH MUNICIPAL CORPORATION OF HYDERABAD WITH EFFECT FROM 16/04/2007. WE HAVE ALSO GONE THROUGH THE RECORD PLACED IN THE PAPER BOOK AT PAGES 76 & 77. AT PAGE 76, A COPY OF THE INTIMATION IS PLACED ISSUED BY THE TOWN PLANNING OFFICER, QUTHBULLAPUR , CIRCLE 15, GHMC VIDE REF. NO. G/1240/2008, DATED 04/10/2008 INFORMING THAT THE LAND IS NOT FALLING IN THE GHMC LIMITS. AT PAGE 77, A COPY OF THE AGRICULTURAL 7 ITA.NO.1778/HYD/2014 SMT. D. JYOTHISHMATHI, HYDERABAD. LAND CERTIFICATE IS PLACED, ISSUED BY THE DEPUTY COLLECTOR & MANDAL REVENUE OFFICER, QUTUBULLAPUR MANDAL VIDE REF. NO. A/13607/2005, DATED 20/08/2005 STATING THAT THE LANDS ARE UNDER CULTIVATION BY RAISING CROPS I.E. PADDY, CATTLE FEED, MAIZE, JOWAR, VEGETEABLES ETC. 37. FURTHER, WE MAKE IT CLEAR THAT WHEN THE LAND WHICH DOES NOT FALL UNDER THE PROVISIONS OF SECTION 2(14)(III) OF THE IT ACT AND AN ASSESSEE WHO IS ENGAGED IN AGRICULTURAL OPERATIONS IN SUCH AGRICULTURAL LAND AND ALSO BEING SPECIFIED AS AGRICULTURAL LAND IN REVENUE RECORDS, THE LAND IS NOT SUBJECTED TO ANY CONVERSION AS NON-AGRICULTURAL LAND BY THE ASSESSEE OR ANY OTHER CONCERNED PERSON, TRANSFERS SUCH AGRICULTURAL LAND AS IT IS AND WHERE IT IS BASIS, IN SUCH CIRCUMSTANCES, IN OUR OPINION, SUCH TRANSFER LIKE THE CASE BEFORE US CANNOT BE CONSIDERED AS A TRANSFER OF CAPITAL ASSET OR THE TRANSACTION RELATING TO SALE OF LAND WAS NOT AN ADVENTURE IN THE NATURE OF TRADE SO AS TO TAX THE INCOME ARISING OUT OF THIS TRANSACTION AS BUSINESS INCOME. 4.1. AS THE ISSUE INVOLVED IN THE PRESENT CASE AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE MATERIA LLY SIMILAR TO THE CASE OF SMT. M. VIJAYA AND OTHERS (SUPRA), WE R ESPECTFULLY FOLLOW THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL RENDERED IN THE SAID CASE AND UPHOLD THE IMPUGNED O RDER OF THE LD. CIT(A) HOLDING THAT THE LAND IN QUESTION BE ING AGRICULTURAL LAND SITUATED BEYOND 8 K.MS FROM THE L IMITS OF HYDERABAD MUNICIPAL CORPORATION, IS NOT A CAPITAL A SSET WITHIN THE MEANING OF SECTION 2(14) AND THE PROFIT ARISING FROM THE SAID LAND IS NOT CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE AS CAPITAL GAINS. WE ALSO UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) HOLDING THAT THE ACTIVITY OF THE ASSESSEE OF PURCHASE AND 8 ITA.NO.1778/HYD/2014 SMT. D. JYOTHISHMATHI, HYDERABAD. SALE OF THE SAID LAND WAS NOT AN ADVENTURE IN THE N ATURE OF TRADE AS ALLEGED BY THE ASSESSING OFFICER. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.05.2015. SD/- SD/- (ASHA VIJAYARAGHAVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 13 TH MAY, 2015 VBP/- COPY TO 1. THE DCIT, CIRCLE 6(1), 7 TH FLOOR, D BLOCK, I.T. TOWERS, MASAB TANK, HYDERABAD. 2. SMT. D. JYOTHISHMATHI, PLOT NO.173, PRASHASAN NAGAR , ROAD NO.72, JUBILEE HILLS, HYDERABAD. 3. CIT(A)-IV, HYDERABAD. 4. CIT-III, HYDERABAD. 5. D.R. I.T.A.T. B BENCH, HYDERABAD. 6. GUARD FILE