ACIT, CHENNAI V. Pallavaram Kothandaraman Ramesh, CHENNAI

ITA 1808/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64422 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-10-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 09-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: N DEVANATHAN
• Keywords: Capital asset

Judgement Text

; IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH CHENNAI BEFORE SHRI N. S. SAINI, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ------- ITA NO. 1808/MDS/2011 ASSESSMENT YEAR : 2008-09 THE ASST. COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-I(3), CHENNAI. V. SHRI PALLAVARAM KOTHANDARAMAN RAMESH, NO. 20 (OLD NO. 11), POES ROAD, FIRST STREET, TEYNAMPET, CHENNAI-600 018. (P AN : AAJPR5893B) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. DASGUPTA, JCIT RESPONDENT BY : SHRI N. DEVANATHAN, ADVOCATE DATE OF HEARING : 10.1 0.2012 DATE OF PRONOUNCEMENT : 17.10.201 2 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE CIT(APPEALS)-III, CHENNAI DATED 08-08-2011 FOR THE ASSESSMENT YEAR 2008-09. ITA NO.1808/MDS/2011 2 2. FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN INDI VIDUAL. HE HAS FILED A RETURN OF INCOME ADMITTING TOTAL INCOME OF ` 12,04,59,720/-. THE RETURN WAS INITIALLY PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961. SUBSEQUENTLY, IT WAS SEL ECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3 ) BY DETERMINING THE TOTAL INCOME AT ` 12,45,87,803/- BY ADDING ` 41,28,083/- TOWARDS LONG TERM CAPITAL GAINS ON SALE OF AGRICULTURAL LAND. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAD OBSERVED THAT THE ASSESSEE WA S HAVING A LAND AND HIS SHARE OF THE LAND MEASURING 25 CENTS A T KANATHUR REDDYKUPPAM VILLAGE WAS TRANSFERRED BY WAY OF ABSOL UTE SALE. THE ASSESSEE PROVIDED COPY OF THE SALE DEED DATED 16-04-2007 ALONG WITH COPY OF THE SKETCH DETAILING THE TOPOGRA PHY OF THEM LAYOUT IN WHICH THE PLOT AT KANATHUR REDDYKUPPAM IS COMPRISED. THE SALE CONSIDERATION RECEIVED BY THE ASSESSEE FRO M SMT. SAROJA THYAGARAJAN WAS ` 50 LAKHS AND AFTER ADJUSTMENT OF INDEXED COST BEING ` 8,71,917/-, THE BALANCE LONG TERM CAPITAL GAIN WAS ` 41,28,083/-. THE ASSESSEE HAS NOT OFFERED THE ABOVE LONG TERM CAPITAL GAINS FOR TAXATION ON THE G ROUND THAT THE LAND IN QUESTION WAS AGRICULTURAL LAND. ITA NO.1808/MDS/2011 3 4. THE ASSESSING OFFICER FURTHER OBSERVED THAT THOU GH THE SCHEDULE OF THE PROPERTY DESCRIBED THE ASSET AS AGR ICULTURAL LAND, THE RECORDS OF THE SRO DEPICTED CONTRADICTING SCENARIO. THE DATA AVAILABLE WITH THE REGISTRATION DEPARTMENT , GOVERNMENT OF TAMILNADU WERE OBTAINED FROM THE NET AND AS PER THE DATA AVAILABLE ON THE NET THE SRO NOTIFIED SURVEY NUMBER-WISE GUIDELINE VALUES AS RESIDENTIAL AREA - CLASS II. THE ASSESSING OFFICER OBSERVED THAT SURVEY NO. 98/8 5A1 IS NOT ALONE ONLY A RESIDENTIAL AREA BUT THE WHOLE LOCALIT Y HAS BEEN CLASSIFIED AS RESIDENTIAL AREA - CLASS II. GOING B Y THE LOCATION, PROXIMITY TO URBANIZED AREA, DEVELOPMENT IN THE LOC ALITY, UTILITY, PHENOMENAL COST MAKING AGRICULTURAL OPERATIONS UNPR ODUCTIVE AND UNFEASIBLE AND TOPOGRAPHY OF THE LAY OUT, THE P ROPERTY UNDER CONSIDERATION COULD NOT BE CLASSIFIED AS AGRI CULTURE IN NATURE. THE REGISTRATION DEPARTMENT OF THE GOVERNM ENT OF TAMILNADU HAS CLASSIFIED THE PROPERTY AS RESIDENTIA L WAY BACK IN THE YEAR 2003 WHILE THE PROPERTY WAS SOLD IN THE YE AR 2007. THE DEPARTMENT HAVING PROVIDED THE DATA ON THE SALE VALUE OF THE LAND BASED ON SQ. FT. AND SQ. MTR. SCALE AND DI SDAINING ITSELF FROM GIVING SUCH INFORMATION ON ACRE AND HECTARE SC ALE ITSELF STRENGTHENS THE DEPARTMENTS VIEW THAT THE PROPERTY UNDER ITA NO.1808/MDS/2011 4 CONSIDERATION IS NOT AGRICULTURAL LAND IN NATURE. THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT THE ASSESSEE PROD UCED A CERTIFICATE FROM THE VAO, KANATHUR REDDYKUPPAM DATE D 23-09- 2010 THAT THE SAID LAND IS A DRY, RAIN-FED AGRICULT URAL LAND. THE CERTIFICATE OF THE VAO HAS NO SIGNIFICANCE WHEN OFF ICIAL WEBSITE OF THE GOVERNMENT OF TAMILNADU CATEGORISES THE PROP ERTY AS LOCATED IN RESIDENTIAL AREA CLASS II AND THAT TOO FROM THE YEAR 2003. BY CONSIDERING THE SKETCH OF THE LAY OUT IT C LEARLY SHOWS THAT IN THE YEAR 2004 ITSELF PROPER ROADS HAD BEEN LAID, PROVIDING ACCESS TO EACH OF THE PLOTS LOCATED IN IT . IF THE LAND WAS AGRICULTURAL IN NATURE, SUCH A ROAD APPROACH TO EACH OF THE PLOTS SITUATED IN IT WOULD NOT HAVE BEEN CONCEIVED. AGRICULTURAL LANDS ARE GENERALLY SOLD IN PATCHES AND ARE CERTAIN LY DISTINCT FROM THE CHARACTERISTICS EXHIBITED IN THIS LAY OUT. THIS DESCRIPTION IS AN ADDITIONAL PARAMETER TO HOLD THAT THE LAND UNDER CONSIDERATION IS NOT AGRICULTURAL IN NATURE. FURTHER DURING THE PAST MANY YEARS SINCE 2004 BEING THE YEAR OF PU RCHASE, THE ASSESSEE HAS NOT OFFERED ANY INCOME OUT OF AGRICULT URAL OPERATIONS FROM THIS PROPERTY, WHICH SUBSTANTIATES EVEN AT THE TIME OF PURCHASE OF THE PROPERTY BY THE ASSESSEE, I T CANNOT BE TERMED AS AGRICULTURAL. WITH THE ABOVE OBSERVATION S, THE ITA NO.1808/MDS/2011 5 ASSESSING OFFICER HAS HELD THAT THE PROPERTY MEASUR ING 25 CENTS SITUATED IN SURVEY NO. 98/85A1 IN KANATHUR REDDYKUP PAM AND SOLD BY THE ASSESSEE DURING THE YEAR AS AGRICULTUR AL IN NATURE, COULD NOT BE EXEMPTED AND WAS BROUGHT TO TAX AS LON G TERM CAPITAL GAINS. ACCORDINGLY, TAX WAS CALCULATED AND ADDITION WAS MADE. 5. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFOR E THE CIT(APPEALS). IT WAS SUBMITTED BEFORE THE LEARNED CIT(APPEALS) THAT THE AREA IN WHICH THE LAND BELONG ING TO THE ASSESSEE WAS SITUATED WAS VAST DEVELOPING AREA AND ON THAT BASIS ALONE IT CANNOT BE SAID THAT THE ASSESSEES L AND IS NOT AGRICULTURAL LAND. IT WAS FURTHER SUBMITTED THAT T HE LAND IS SITUATED IN COASTAL REGULATION ZONE AND HENCE CONST RUCTION ACTIVITY IS NOT PERMITTED. IT WAS FURTHER SUBMITT ED BEFORE THE LEARNED CIT(APPEALS) THAT THE LAND WAS PURCHASED ON 8-10-2004 AND AT THE TIME OF PURCHASE THE LAND WAS AGRICULTUR AL LAND. EVEN THE LETTER ISSUED BY THE VAO DATED 23-09-2010 SHOWS THAT THE LAND BELONGING TO THE ASSESSEE WAS AGRICULTURAL LAND. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS CULTIVATED VEGETABLES IN THAT LAND AND MOSTLY USED FOR SELF-CONSUMPTION. ITA NO.1808/MDS/2011 6 6. THE LEARNED CIT(APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD THAT AS PER THE RE VENUE RECORD THE LAND IS AGRICULTURAL LAND AND THE LAND IS SITUA TED AT A DISTANCE OF MORE THAN 15 KM. FROM THE CITY LIMIT. THEREFORE, THE ASSET IS NOT A CAPITAL ASSET IN VIEW OF THE EXCEPTI ON PROVIDED IN SECTION 2(14)(III) OF THE ACT AND SUBJECTING THE PR OPERTY TO CAPITAL GAIN IS NOT JUSTIFIED. THE LEARNED CIT(APPE ALS) FURTHER OBSERVED THAT THE ASSESSEE HAS NOT MADE ANY REQUEST FOR RE- CLASSIFICATION OF THE LAND BEFORE ITS SALE AND HE H AS ALSO NOT SOUGHT ANY PERMISSION TO UNDERTAKE HOUSING OR CONST RUCTION ACTIVITY ON IT. THE LAND IS ALSO 200 MTRS. FROM TH E SEA SHORE AND AS PER CMDA REGULATION, NO CONSTRUCTION ACTIVIT Y CAN BE CARRIED ON AT ANY LAND WITHIN THE COASTAL REGULATIO N ZONE, I.E. AREA UPTO 500 MTRS. FROM THE SEA SHORE. HE FURTHER OBSERVED THAT THE POPULATION OF THE VILLAGE IN WHICH THE LAN D IS SITUATED IS LESS THAN 10,000 AND IT DOES NOT FALL WITHIN THE LI MIT OF SPECIFIED IN SEC. 2(14). THE LAND WAS ALSO USED FOR AGRICULT URAL PURPOSES UPTO THE POINT OF SALE THOUGH THE PRODUCE WAS USED FOR SELF- CONSUMPTION AND NOT FOR SALE. WITH THE ABOVE OBSER VATIONS, THE LEARNED CIT(APPEALS) AND BY FOLLOWING CERTAIN DECIS IONS, DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. ITA NO.1808/MDS/2011 7 7. ON BEING AGGRIEVED, THE REVENUE HAS CARRIED THE MATTER BEFORE THE TRIBUNAL. THE LEARNED DR HAS SUBMITTED THAT AS PER THE TAMILNADU GOVERNMENT REGISTRATION DEPARTMENT IN THE YEAR 2003 ITSELF THE LAND WAS CLASSIFIED AS A RESIDENTIA L LAND AND, THEREFORE, THE CERTIFICATE ISSUED BY THE VAO CANNOT SUPERSEDE THE CLASSIFICATION MADE BY THE TAMILNADU GOVERNMENT . HE FURTHER ARGUED THAT THE ASSESSEE HAS NOT OFFERED A SINGLE PENNY AS AGRICULTURAL INCOME. THEREFORE IT SHOWS THAT TH E ASSESSEE HAS NOT CARRIED ON ANY AGRICULTURAL OPERATIONS. HE RELIED ON THE DECISION IN THE CASE OF SMT. SARIFABIBI MOHMED IBRA HIM AND OTHERS V. CIT (204 ITR 631)(SC). IN THIS CASE THE HON'BLE SUPREME COURT HAS HELD THAT WHETHER THE LAND IS AGR ICULTURAL LAND OR NOT IS ESSENTIALLY A QUESTION OF FACT. IT HAS TO BE DECIDED BASED ON VARIOUS FACTS AND CIRCUMSTANCES OF THE CAS E. THE OTHER DECISION RELIED ON BY THE LEARNED DR IS FAZAL BHOY INVESTMENT CO. P. LTD. V. CIT (176 ITR 523) (BOM). IN THIS CASE THE HONBLE BOMBAY HIGH COURT HAS HELD THAT IN THE A BSENCE OF EVIDENCE TO SHOW THAT THE LAND WAS PUT TO USE FOR A NY AGRICULTURAL USE THE SAME CANNOT BE TREATED AGRICUL TURAL LAND AND THE SALE OF WHICH COULD NOT BE EXCLUDED FROM TH E LEVY OF CAPITAL GAINS TAX. ITA NO.1808/MDS/2011 8 8. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LEARNED CIT(APPEALS) AND SUBMITTED THAT NO PROPER VERIFICAT ION WAS DONE BY THE ASSESSING OFFICER BEFORE COMING TO THE CONCLUSION THAT THE LAND IS NOT AGRICULTURAL LAND. IT IS SU BMITTED THAT AT THE TIME OF PURCHASE IT WAS AN AGRICULTURAL LAND AN D EVEN TODAY THE LAND IS AGRICULTURAL LAND. THERE IS A WELL AND THERE IS ELECTRICITY CONNECTION. HE FURTHER POINTED THAT PA GE NO.32 OF THE PAPER BOOK SHOWS THAT THE LAND WHICH WAS SOLD B Y THE ASSESSEE IS AGRICULTURAL LAND. IT WAS FURTHER POIN TED OUT THAT PAGES 41 AND 42 SHOW THAT NO CONSTRUCTION IS PERMIT TED AND SUBMITTED THAT THE CASE LAWS RELIED ON BY THE LEARN ED DR HAVE NO APPLICATION TO THE FACTS OF THE PRESENT CASE. H E RELIED ON THE DECISIONS IN THE CASES OF CIT V. WILLIAMSON FINANCI AL SERVICES AND OTHERS (297 ITR 17) (SC) AND K.C. THOMAS V. AGR ICULTURAL INCOME TAX OFFICER AND OTHERS (91 ITR 438) (KER). THE LEARNED COUNSEL FOR THE ASSESSEE HAS FURTHER SUBMITTED THAT THE CENTRAL GOVERNMENT HAS NO LEGISLATIVE COMPETENCE TO LEVY TH E TAX ON THE STATE SUBJECT. 9. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY ITA NO.1808/MDS/2011 9 ISSUE IN THIS APPEAL IS WHETHER THE LAND PURCHASED BY THE ASSESSEE IS AGRICULTURAL LAND OR NOT. THE ASSESSEE HAD PURCHASED A PIECE OF LAND MEASURING 25 CENTS AT KAN ATHUR REDDYKUPPAM IN THE YEAR 2004 FOR ` 8,71,917/-. SUBSEQUENTLY THE ASSESSEE SOLD THE SAME LAND ON 16-04-2007 TO SM T. SAROJA THYAGARAJAN FOR ` 50 LAKHS. ACCORDING TO THE ASSESSEE THE LAND SOLD BY HIM IS AGRICULTURAL LAND AND NO CAPITAL GAI NS TAX IS REQUIRED TO BE PAID. ACCORDING TO THE ASSESSING OF FICER AS PER THE TAMILNADU GOVERNMENT REVENUE RECORD (SRO) THIS LAND WAS ALREADY CLASSIFIED AS A RESIDENTIAL AREA LAND AND A LSO AS PER THE LAY OUT PROPER ROADS HAD ALREADY BEEN LAID PROVIDIN G ACCESS TO EACH PLOT LOCATED IN IT AND THE ASSESSEE HAS NOT CA RRIED ON ANY AGRICULTURAL ACTIVITY. THE LEARNED CIT(APPEALS) D ELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING THAT THE VAO HAD ISSUED A CERTIFICATE STATING THAT THE LAND BELONGING TO THE ASSESSEE IS CULTIVABLE AGRICULTURAL LAND AND TH E ASSESSEE HAS NOT MADE ANY REQUEST FOR RE-CLASSIFICATION AND HAD NOT SOUGHT FOR PERMISSION TO UNDERTAKING HOUSING OR CONSTRUCTI ON ACTIVITY AND THE LAND WAS ALSO USED FOR AGRICULTURAL PURPOSE S UPTO THE POINT OF SALE THOUGH THE PRODUCE WAS USED FOR SELF CONSUMPTION AND NOT FOR SALE. PAGE 30 OF THE PAPER BOOK FILED BY THE ITA NO.1808/MDS/2011 10 ASSESSEE SHOWS THAT SURVEY NO. 98/85A1 IS IN A CULT IVABLE DRY AGRICULTURAL LAND. AS PER THE CERTIFICATE ISSUED B Y THE VAO IT IS CLEAR THAT IT IS A CULTIVABLE DRY AGRICULTURAL LAND . IT DOES NOT MEAN THAT THE ASSESSEE IS CARRYING ON AGRICULTURAL OPERATIONS IN THAT LAND. THE LEARNED CIT(APPEALS) GAVE A SPECIFI C FINDING THAT THE ASSESSEE HAS CARRIED ON AGRICULTURAL OPERATIONS . WE FIND THAT THERE IS NO BASIS FOR THE LEARNED CIT(APPEALS) TO GIVE SUCH AN OBSERVATION. THE LEARNED CIT(APPEALS) GAVE A F URTHER FINDING THAT IN THE ABOVE LAND THE ASSESSEE USED TH E LAND FOR AGRICULTURAL PURPOSE AND THE PRODUCE WAS USED FOR S ELF- CONSUMPTION AND NOT FOR SALE. THERE IS NOTHING ON THE RECORD TO SHOW THAT THE ASSESSEE HAD CARRIED ON ANY AGRICULTU RAL OPERATIONS. IN FACT, THE LEARNED COUNSEL FOR THE A SSESSEE HAS SUBMITTED THAT THERE ARE SOME COCONUT TREES. WHEN WE SPECIFICALLY ASKED AS TO HOW MANY TREES ARE THERE O N THE LAND, THE LEARNED COUNSEL FOR THE ASSESSEE WAS UNABLE TO ANSWER. BUT HE SUBMITTED THAT THE ASSESSEE HAS CARRIED ON SOME VEGETABLE CULTIVATION AND THE PRODUCE WAS USED FOR SELF-CONSU MPTION. THERE IS NOTHING AVAILABLE ON RECORD TO BELIEVE THE SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE. IN F ACT, THE ASSESSING OFFICER HAS GIVEN A CATEGORICAL FINDING T HAT THE SKETCH ITA NO.1808/MDS/2011 11 OF THE LAY OUT IN WHICH THE PROPERTY UNDER CONSIDER ATION IS CONSTITUTED, WAS EXAMINED. THE LAY OUT WAS MADE I N THE YEAR 2004 AND PROPER ROADS HAD BEEN LAID HAVING ACCESS T O THE PLOTS SITUATED IN IT AND FOR THE PAST MANY YEARS, I.E. FR OM THE YEAR 2004 WHEN THE ASSESSEE HAD PURCHASED THE LAND NO S INGLE PENNY WAS OFFERED AS AGRICULTURAL INCOME. NOTHING WAS BROUGHT ON RECORD TO CONTRADICT THE FINDINGS GIVEN BY THE A SSESSING OFFICER. THE ENTIRE FINDING OF THE LEARNED CIT(APP EALS) MAINLY BASED ON THE CERTIFICATE ISSUED BY THE VAO. WHEN T HE TAMILNADU GOVERNMENT ITSELF HAS NOTIFIED THE AREA I N WHICH THE LAND IN QUESTION IS SITUATED AS A RESIDENTIAL AREA, THE CERTIFICATE ISSUED BY THE VAO CANNOT SUPERSEDE THE CLASSIFICATI ON GIVEN BY THE TAMILNADU GOVERNMENT. APART FROM THAT THE OTHER CONTENTION OF THE ASSESSEE CONSIDERED BY THE LEARNE D CIT(APPEALS) IS THAT THE ASSESSEE HAS NOT APPLIED F OR THE CONVERSION OR PERMISSION WAS SOUGHT FOR THE CONSTRU CTION. WHEN THE LAND SITUATED ITSELF IS IN A RESIDENTIAL A REA, THE QUESTION OF APPLICATION FOR CONVERSION OR PERMISSIO N FOR CONSTRUCTION DOES NOT ARISE. INSOFAR AS COASTAL RE GULATION IS CONCERNED, NOTHING WAS BROUGHT BEFORE US AS TO WHAT WAS THE POSITION IN THE YEAR 2004 AND THE POSITION IN 2007. THERE IS ITA NO.1808/MDS/2011 12 NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE HAD CARRIED ON ANY AGRICULTURAL OPERATIONS. THEREFORE, IT CANNOT BE SAID THAT THE LAND SITUATED IN KANATHUR REDDYKUPPAM IN SURVEY NO. 98/85A1 IS AGRICULTURAL LAND. THE DECISIONS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE AS THE FACTS ARE ENTIRELY DIFFERENT FROM THE FACTS INVOLVED IN T HE PRESENT CASE. THEREFORE THESE DECISIONS DO NOT HELP THE ASSESSEE. 10. INSOFAR AS THE CONTENTION OF THE LEARNED COUNSE L FOR THE ASSESSEE IN RESPECT OF THE LEGISLATIVE COMPETENCE I S CONCERNED, THERE IS NO MERIT IN IT. WE THEREFORE REJECT THE S AME. 11. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, W E REVERSE THE ORDER PASSED BY THE LEARNED CIT(APPEALS) AND RE STORE THE ORDER OF THE ASSESSING OFFICER. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 17 TH OF OCTOBER, 2012, AT CHENNAI. SD/- SD/- (N. S. SAINI) ( V.DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 17 TH OCTOBER, 2012. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE