KUTCH DEVELOPMENT ORGANISATION-HOPE 1000, MUMBAI V. C.I.T.13, MUMBAI

ITA 2629/MUM/2012

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0685 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2007-2008
• Appeal Filed On: 18-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Capital Gains
• Section: 50C; 208; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE SHRI M.BALAGANESH, AM & SHRI RAM LAL NEGI , JM ITA NO. 2629 / MUM/20 1 2 ( ASSESSMENT YEAR : 20 0 7 - 200 8 ) M/S KUTCH DEVELOPMENT ORGANISATION - HOPE 1000 309/310, VEENA CHAMBERS, DANA BUNDER, MA SJID BUNDER, MUMBAI - 400009 VS. CIT, CITY - 13 , MUMBAI PAN NO. AA A AK 0 225 E ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO. 236 /MUM/201 4 ( ASSESSMENT YEAR :20 0 7 - 200 8 ) M/S KUTCH DEVELOPMENT ORGANISATION - HOPE 1000 309/310, VEENA CHAMBERS, DANA BUNDER, MASJID BUNDER, MU MBAI - 400009 VS. ITO13(2)(4), MUMBAI PAN NO. AA AAK 0225 E (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI VIPUL JOSHI, AR REVENUE BY SHRI B. SRINIVAS, CITDR MRS. JATHILAKSHMI NAYAK, DR DATE OF HEARING 10/05/2019 DATE OF PRONOUNCEMENT 29 / 05 /2019 / O R D E R PER M. BALAGANESH (A.M) : THE APPEAL IN ITA NO. 2629/MUM/2012 HAS BEEN FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 - 2008 ARISING OUT OF THE ORDER PASSED BY THE CIT, CITY - 13, MUMBAI, DATED 31.01.2012 U/S.263 OF THE I.T.ACT AND APPEAL IN ITA NO. 236/MUM/2014 HAS BEEN FILED BY THE ASSESSEE ARISING OUT OF THE ORDER PASSED BY THE C OMMISSIONER OF INCOME ITA NO S . 2629/MUM/12 & ITA NO.236/MUM/2014 M/S KUTCH DEVELOPMENT ORGANISATION HOPE - 1000 2 TAX (APPEAL ) - 24, MUMBAI, DATED 28.10.2013 FOR THE ASSESSMENT YEAR 2007 - 2008 (IN SHORT LD. CIT(A)) , PURSUANT TO ORDER PASSED BY INCOME TAX O FFICER - 13(2)(4), MUMBAI (IN SHORT THE LD. AO) U/S.143(3) R.W.S.263 OF THE ACT DATED 30.10.2012 GIVING EFFECT TO THE ORDER PASSED U/S.263 OF THE ACT BY THE CIT. ITA NO.2629/MUM/2012 2. THIS IS AN APPEAL FILED AGAINST THE ORDER PASSED BY THE LD. CIT U/S .263 OF THE ACT, DATED 31.01.2012. THE ASSESSEE K UTCH DEVELOPME NT ORGANISATION - HOPE 1000 (IN SHORT KDO ) , WHICH IS THE NAME OF THE COMMUNITY I.E. KUTCHI DASHA OSWAL ( KDO ) AND HOPE, IS A GOOD SYMBOLIC NAME, MADE UP OF TWO WORDS, I.E. HO USING PE OPLE. THE AS SESSEE - ORGANIZATION WAS FORMED AS AN ASSOCIATION OF PERSONS ( AOP ) CONSIST ING OF 14 MEMBERS AND IS A NON - PROFIT ORGANIZATIO N . IT WAS A SPECIAL PURPOSE VEHICLE ( SPV ) TO ACQUIRE LAND AND CARRY OUT DAY TO DAY MANAGEMENT OF MONEY AND ADMINISTRATION AND FINALLY HAND OVER TO A CHARITABLE ORGANIZATION THE LAND AND OTHER RIGHTS AND CLOSE THE AOP. NONE OF THE MEMBERS OF THE AOP HAVE CONTRIBUTED ANY MONEY AND THERE IS NO PROFIT SHARING. THEIR CONTRIBUTION WAS HONORARY AND SELFLESS SERVICE AND THEIR GOODWILL. THUS IT I S NOT A USUAL AOP AS IS UNDERSTOOD NORMALLY . THE AOP FORMED VIDE AGREEMENT DT.25.01.1995 WHEREIN THE PREAMBLE IN PAGE NO.3 AT PARA 2 OF THE SAID AGREEMENT READS AS UNDER : - 'WHEREAS THE PARTIES OF 1 ST TO 14 TH PARTS HERETO ARE DOING THEIR OWN RESPECTIVE BU SINESSES AND ARE DOING VERY WELL BY THE GRACE OF ALMIGHTY AND THE FOREFATHERS OF THE COMMUNITY. AT THIS STAGE OF LIFE THEY FEEL THA T THEY SHOULD WHOLEHEARTEDLY CONTRIBUTE THEIR MITE FOR THE BETTERMENT OF THE COMMUNITY PEOPLE AND OTHER JAINS AT LARGE BY ITA NO S . 2629/MUM/12 & ITA NO.236/MUM/2014 M/S KUTCH DEVELOPMENT ORGANISATION HOPE - 1000 3 PRO VIDING THEM RESIDENCES WITH AMENITIES AT REASONABLE OR EVEN A SUBSIDISED RATES AND PROVIDE THEM BETTER LIVING ENVIRONMENT WITH MODEM FACILITIES AND PROPOSED TOWNSHIP SITE AT DOMBIVLI (EAST). WITH THIS SALE OBJECTIVE THIS INSTRUMENT OF ASSOCIATION EXECUTED ON THIS 25TH DAY OF JA NU A RY, 1995 AS REAL ESTATE OWNERS, BUILDERS, DEVELOPERS, CONTRACTORS ETC. UNDER THE' NAME AND STYLE OF 'KUTCH DEVELOPMENT ORGANISATLON - HOPE 1000'. 3. IT IS, THUS, EVIDENT FROM THE READING OF THE AGREEMENT DT.25.01.1995 THAT 14 PERS ONS HAVE COME TOGETHER UNDER ONE ROOF AS ASSOCIATION TO CONTRIBUTE TOWARDS UPLIFTMENT OF THE PEOPLE OF KUTCHIES AND OTHER JAINS AT LARGE AND THE OBJECT FOR WHICH THE AOP WAS FORMED WAS CHARITABLE IN NATURE. 4. KUTCH DEVELOPMENT ORGANISATION LTD IS A REGIS TERED COMPANY UNDER SECTION 25 OF THE INDIAN COMPANIES ACT , 1956 AND IS ALSO ASSESSED TO TAX. IT IS TO THIS NO DIVIDEND CHARITABLE COMPANY THE AOP WAS TO ASSIGN THE ULTIMATE LAND ETC. RECEIVED IN THE FORM OF OVERRIDING TITLE. KEEPING IN VIEW THE ABOVE OBJE CTIVES, THE AOP ACQUIRED DE VELOPMENT RIGHTS IN ABOUT 16 ACRES OF LAND AT DOMBIVLI (EAST). THE MONEY REQUIRED FOR ACQUIRING THIS WAS RAISED IN A NOVEL WAY I.E. LAND WAS USED AS A RESOURCE. ABOUT HALF OF THE LAND WAS PLOTTED A N D 125 PLOTS OF LAND WERE ALLOTT ED TO COMMUNITY MEMBERS. THE BALANCE LAND WAS TO BE USED FOR SUBSIDIZED HOUSING SCHEME FOR THE NOT SO WELL TO DO JAINS. AS THIS SCHEME WAS PROGRESSING , MANY COMMUNITY MEMBERS EXPRESSED DESIRE THAT IF THE COMMUNITY CAN THINK OF A SMAL L SANATORIUM IN NATURAL ENVIRONMENT WITH GREEN FOLIAGE ALL AROUND, GROWING THEIR OWN STYLE OF VEGETABLES AND FOOD ITEMS, GETTING FRESH MILK, AND IN THE VICINITY OF THE CITY OF MUMBAI, IT WILL BE OF GREAT HELP TO THE WEAKER SECTIONS TO RECOUP HEALTH. WITH THIS VIEW IN MIND , THE ITA NO S . 2629/MUM/12 & ITA NO.236/MUM/2014 M/S KUTCH DEVELOPMENT ORGANISATION HOPE - 1000 4 I MPUGNE D AGRICULTURAL LAND AT RIT G HAR, PANVEL, WAS PURCHASED BY THE AOP. THE PROJECT WAS NAMED AS ABDASHA ESTATE, IN THE NAME OF THE TALUKA IN KUTCH WHERE JAIN COMMUNITY PEOPLE RESIDED BEF ORE MIGRATING TO MUMBAI AND OTHER AREAS. THE ASSESSEE STATED BEFORE THE AUTHORITIES THAT IT WAS DOING THIS ENTIRE HOUSING PROJECT WITH AN INTENTION OF NOT MAKING ANY PROFIT THEREON. IT EXPLAINED THAT IT HAD AN APPROACH PROBLEM FOR THEIR ACQUIRED LAND AND PATH LEADING TO THEIR LAND WAS BEING CLAIMED BY THE VILLAGE. THERE WE RE FEW POCKETS OF LAND IN BETWEEN THE LAND BELONGING TO THE ASSESSEE , WHICH IT COULD NOT PURCHASE AND THOSE OWNERS OF LAND LOCKED PARCELS OF LAND WERE CREATIN G TERRIBLE PROBLEMS TO THE ASSESSEE . THE VILLAGERS DID NOT ALLOW THE ASSESSEE TO GROW ANY CROPS. I T WAS ALSO SUBMITTED THAT A S A MATTER OF FACT , SOME OF THE VILLAGERS, ACTUALLY CONTINUED TO TILL THE LAND AND ENJOYED THE INCOME AND THE ASSESSEE COULD NOT PREVENTED IN SPITE OF APPOINTING SECURITY. THE ASSISTANCE OF POLICE AND LEGAL HELP SOUGHT BY THE ASS ESSEE WAS OF NO AVAIL. SINCE THE MEMBERS OF THE AOP, WHO WERE EXTREMELY BUSY IN THEIR RESPECTIVE BUSINESSES IN MUMBAI HAD NO TIME OR ENERGY TO FIGHT VILLAGERS OR FOR LI TIGATION AND THAT TOO AT PANVEL, T HE LAND WAS CONTINUED TO BE CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL (UNDERLINING PROVIDED BY US) . THERE IS NO DISPUTE THAT T HE LAND , WHICH WAS BEING TILLED BUT BY OTHERS , WAS FULLY SURROUNDED BY FARM LANDS . THE ASSESSEE PLEADED THAT THE SAID LAND IS LOCATED ABOUT 14KMS AWAY FROM PANVEL. NO PLOTTING OF LAND OR CONVERSION OF AGRICULTURAL LAND INTO NON - AGRICULTURE WAS DONE. NO LAYOUT, ROADS AND OTHER FACILITIES WERE PROVIDED. THE LAND WA S PURCHASED IN ACRES AND WAS SOLD IN ACRES. ITA NO S . 2629/MUM/12 & ITA NO.236/MUM/2014 M/S KUTCH DEVELOPMENT ORGANISATION HOPE - 1000 5 5. THE RETURN O F INCOME FOR THE ASSESSMENT YEAR 2007 - 08 WAS FILED BY THE ASSESSEE ON 22 - 11 - 2017 DECLARING NIL INCOME. THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) THE A CT ON 24 . 12 . 2009 DETERMINING TOTAL INCOME AT RS. N IL. THE AOP IS ENGAGED IN THE BUSINESS OF REAL E STATE , O WNERS , BUILDERS , DEVELOPERS , C ONTRACTORS , ETC . DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSEE PRODUCED THE COPY OF BANK STATEMENT , BALANCE SHEET , PROFIT AND LOSS ACCOUNT , CAPITAL ACCOUNT, COPY OF AGREEMENT FOR FORMATION OF AOP, COPY OF SALE AGREEMENT AND STATEMENT SHOWING PURCHASE AGREEMENT OF AGRICULTURE LAND AT PANVEL , COPY OF AGREEMENT OF DOMBIVALI LAND , STATEMENT SHOWING APPLICATION MONEY RECEIVED FOR BUNGALOW PLOT, M ONTHWISE DETAILS OF EXPENSES ETC. THE LD. AO IN THE ASSESSMENT ORDER PASSED U/S. 143 ( 3 ) OF THE A CT DATED 24 . 12 . 2009 IN PARA 5 O BSERVED AS UNDER : - 5. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SOLD AGRICULTURAL LAND AT PANVEL AND SHOWN LOSS AT RS. 8 , 31 , 799 / - WHICH IS SHOWN AS EXEMPT. THE P & L A/C REVEALS THAT THE ASSESSEE HAS SHOWN NET PROFIT AT RS. 7 , 10 , 661 / - AND TRANSF ERRED TO W ORK IN P ROGRESS A/C . FINALLY THE LD. AO IN THE COMPUTATION OF INCOME IN THE ASSESSMENT ORDER FRAMED U/S.143(3) OF THE ACT DATED 24.12.2009 OBSERVED THAT LONG TERM CAPITAL LOSS ON SALE OF AGRICULTURAL LAND AT PANVEL OF RS.8,31,799/ - IS EXEMPT. IT IS NOT IN DISPUTE THAT THE LD.AO EXAMINED THE ASPECT AS TO WHETHER THE LAND SOLD AT PANVEL BY THE ASSESSEE IS AN AGRICULTURAL LAND OR NOT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN THIS REGARD , THE ASSESSEE PLACED ON RECORD A LETTER DATED 30.11.200 9 FILED BEFORE THE LD. AO (ENCLOSED IN PAGE 34 OF PAPER BOOK), WHEREIN THE AUTHORISED ITA NO S . 2629/MUM/12 & ITA NO.236/MUM/2014 M/S KUTCH DEVELOPMENT ORGANISATION HOPE - 1000 6 REPRESENTATIVE OF THE ASSESSEE HAD WRITTEN A LETTER TO THE LD.AO STATING THAT THE LAND SOLD DURING THE YEAR AT PANVEL IS AGRICULTURAL LAND AND CAPITAL GAIN ON THE SAME IS NOT APPLICABLE, HOWEVER, WHILE FILING THE RETURN OF INCOME, CAPITAL LOSS WAS SHOWN THEREON AND THE SAME IS NOT TO BE CONSIDERED AS CAPITAL LOSS WHILE FRAMING THE ASSESSMENT . IN OTHER WORDS, AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAD CATEGORICAL LY STATE D BEFORE THE AO THAT SINCE THE LAND SOLD AT PANVEL IS AN AGRICULTURAL LAND AND S UCH SALE HAD RESULT ED IN LONG TERM CAPITAL LOSS OF RS.8,31,799/ - AND THE SAID LOSS IS NOT ELIGIBLE TO BE CARRIED FORWARD TO SUBSEQUENT YEARS SINCE THIS IS AN AGRICULTURE LAND. THE LD. AO ON BEING DULY SATISFIED ON THIS ASPECT , ACCEPTED THE PLEA OF THE ASSESSEE VIS - - VIS RELEVANT DOCUMENTS AND COMPLETED THE ASSESSMENT . 6. THE ASSESSEE ALSO STATED THAT THE SUCCESS OR A SSESSING O FFICER WAS OF THE OPINION THAT THE INCOME EARNED BY TH E ASSESSEE ON SALE OF LAND AT PANVEL WOULD HAVE TO BE TREATED AS BUSINESS INCOME AND SALE VALUE OF SUCH AGRICULTURAL LAND SHOULD BE TAKEN AS PER THE PROVISIONS OF S ECTION 50C OF THE A CT . THE SUCCESS IVE AO ISSUED A NOTICE U/S.154 OF THE ACT DATED 28.07.2011 SEEKING TO RECTIFY THE COMPUTATION OF CAPITAL GAINS BY ADOPTING CONSIDERATION VALUE FIXED AS PER THE STAMP DUTY AUTHORITY IN TERMS OF SECTION 50C OF THE ACT BY TREATING THE SALE OF LAND AS BUSINESS INCOME. THE ASSESSEE FILED A DETAILED REPLY DATED 10.08.2 011 OBJECTING TO THE PROPOSAL OF THE LD. AO. THEREAFTER NO ORDER WAS PASSED U/S.154 OF THE ACT BY THE LD. AO. ITA NO S . 2629/MUM/12 & ITA NO.236/MUM/2014 M/S KUTCH DEVELOPMENT ORGANISATION HOPE - 1000 7 7. THE LD.AO THEREAFTER CARRIED THE MATTER TO LD. CIT FOR INVOKING REVISIONAL JURISDICTION U/S.263 OF THE ACT. LD. CIT ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE U/S.263 OF THE ACT BY TREATING THE ORDER OF THE LD.AO AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THE GROUND THAT THE SALE OF AGRICULTURE LAND AT PANVEL IS TO BE TAXED AS BUSINESS INCOME AND THE CONSIDERATION THEREON IS TO BE F IXED IN TERMS OF SECTION 50C OF THE ACT. THE ASSESSEE REPLIED TO THE SAID SHOW CAUSE NOTICE BEFORE THE LD. CIT WHICH ARE SUMMARIZED AS UNDER : - ( A) THE AGRICULTURE LAND AT PANVEL WAS PURCHASED BY THE ASSESSEE BY VARIOUS AGREEMENTS IN THE YEAR 1995 FOR A SU M OF RS.19,53,748/ - ; (B) THE SAID AGRICULTURAL LANDS AT PANVEL WERE SOLD VIDE AGREEMENT DATED 30.06.2006 FOR A TOTAL CONS IDERATION OF RS.27,76,728/ - ; (C) IT WAS PLEADED THAT COPIES OF BOTH THE PURCHASE AGREEMENTS AS WELL AS SALE AGREEMENTS WERE DULY FILED BEFORE THE LD.AO AND EXAMINED BY THE LD. AO. IN THE SALE AGREEMENT DATED 30.06.2006, THE STAMP DUTY VALUATION OF THE LAND SOLD WAS MENTIONED AT RS.52,98,075/ - AND THE SAME WAS EXAMINED BY THE LD. AO AND THEN THE WORKINGS OF THE ASSESSEE WERE ACCEPTED BY T HE LD. AO IN THE ASSESSMENT . FROM THE ABOVE, IT WAS ARGUED THAT THE LD. AO HAD DULY APPLIED HIS MIND ON THE ASPECTS OF THE SALE OF AGRICULTURAL LAND AT PANVEL BY THE AOP INCLUDING THE CONSIDERATION THEREON. LD.AO HAD ALSO APPLIED HIS MIND ON THE CLAIM OF LONG TERM CAPITAL LOSS ARISING DUE TO INDEXATION BENEFIT PROVIDED IN THE STATUTE. THERE CANNOT BE TWO POSSIBLE VIEWS ON THE SUBJECT ITA NO S . 2629/MUM/12 & ITA NO.236/MUM/2014 M/S KUTCH DEVELOPMENT ORGANISATION HOPE - 1000 8 MENTIONED MATTER AND THE ONLY VIEW THAT WAS POSSIBLE IN THIS REGARD WAS TAKEN BY THE LD. AO. HENCE, THE SAME CANNOT BE THE SUBJECT MATTER OF REVISION U/S.263 OF THE ACT BY THE LD. CIT. IT WAS ALSO PLEADED THAT THE LD. AO HAS DULY ALSO APPLIED HIS MIND ON THE NON - ELIGIBILITY OF THE RESULTANT LONG TERM CAPITAL LOSS THEREON TO BE CARRIED FORWARD TO SUBSEQUENT YEARS AS THE LAND SO LD WAS AGRICULTURAL LAND. 8. IT WAS ALSO PLEADED THAT IN ANY CASE THE VALUE AS PER THE SECTION 50C OF THE ACT CANNOT BE APPLICABLE F OR LAND HELD AS STOCK - IN - TRADE AS THE PROVISIONS OF SECTION 50C ARE APPLICABLE ONLY FOR CAPITAL ASSETS. THE ASSESSEE IN SUP PORT OF ITS VARIOUS A RGUMENTS PLACED RELIANCE ON THE SERIES OF DECISIONS RENDERED IN THE CONTEXT OF SECTION 263 OF THE ACT BY VARIOUS HONBLE HIGH COURTS AND THE HONBLE SUPREME COURT. 9. LD.CIT, HOWEVER, DISREGARDED THE CONTENTION OF THE ASSESSEE ON THE G ROUND THAT THE ASSESSEE DID NOT DO ANY AGRICULTURAL ACTIVITIES ON THE SUBJECT MENTIONED LAND AT PANVEL AND NO AGRICULTURAL INCOME WAS REPORTED THEREON. MOREOVER, SINCE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE, OWNER, BUILDER, DEVELOPER AND CO NTRACTOR ETC, THE LAND AT PANVEL WOULD ALSO BE OF BUSINESS ASSET OF THE ASSESSEE AND, HENCE, THE GAINS FROM SALE OF SUCH LAND WOULD HAVE TO BE CONSTRUED ONLY AS BUSINESS INCOME OF THE ASSESSEE. LD.CIT ALSO OBSERVED THAT THERE IS NO DOUBT THAT THE LAND IS S HOWN AS AGRICULTURE LAND IN THE REVENUE RECORDS. HE OBSERVED THAT MERELY THE LAND IS SHOWN AS AGRICULTURAL LAND IN THE REVENUE RECORDS, IT WOULD NOT BE SUFFICIENT TO HOLD THE SALE OF LAND AS AGRICULTURAL ACTIVITY. THE MAIN CRITERIA WOULD BE TO EXAMINE AS T O WHETHER THE LAND WAS ACTUALLY ITA NO S . 2629/MUM/12 & ITA NO.236/MUM/2014 M/S KUTCH DEVELOPMENT ORGANISATION HOPE - 1000 9 OR ORDINARILY USED FOR AGRICULTURAL PURPOSES AT OR ABOUT THE RELEVANT PERIOD IN CONSONANCE WITH THE INTENTION OF THE OWNERS OF THE LAND. HE OBSERVED THAT THE REAL INTENTION S OF THE OWNERS (I.E. THE ASSESSEE HEREIN) WERE NOT ASCERTAINED BY THE LD. AO, NOR THE LD. AO HAD CALLED FOR ANY RECORD TO EXAMINE THESE ISSUES NOR WAS ANY DISCUSSION MADE BY THE LD. AO. HENCE, IT CANNOT BE HELD THAT THE LD. AO HAD FORMED ANY OPINION ON THE ISSUE. LD.CIT ALSO OBSERVED THAT THE GROUP OF PERS ONS CAME TOGETHER TO FORM AN AOP TO DO THE BUSINESS OF REAL ESTATE, DEVELOPERS ETC AND NOT TO DO ANY AGRICULTURAL OPERATIONS. THE LANDS WERE PURCHASED IN PURSUANCE OF THE OBJECTS OF THE ASSOCIATION WHICH WAS TO PROVIDE RESIDENTIAL FACILITIES TO PEOPLE FOR THEIR OWN COMMUNITY, HENCE, THERE CANNOT BE TWO OPINIONS THAT THE LANDS WERE NOTHING BUT STOCK - IN - TRADE AND BUSINESS ASSET OF THE ASSESSEE. HENCE, THE GAINS ARISING FROM THE SALE OF SUCH LANDS WOULD HAVE TO BE TREATED ONLY AS BUSINESS INCOME OF THE ASSESSE E. 10. WITH REGARD TO EXAMINATION OF THE PURCHASE AND SALE AGREEMENTS OF LANDS BY THE LD. AO AS CONTENDED BY THE ASSESSEE IS CONCERNED, THE LD. CIT OBSERVED THAT THE PURCHASE OF SALE AGREEMENT DOCUMENTS ALONE WOULD NOT DETERMINE THE NATURE OF INCOME. THE LD. AO DID NOT EXAMINE THE OBJECTS OF THE AOP AND THE NATURE OF THE LAND. THE LD. AO OUGHT TO HAVE APPRECIATED THE FACT THAT THERE WAS NO AGRICULTURAL OPERATIONS CARRIED OUT BY THE ASSESSEE AND NO AGRICULTURAL INCOME WAS REPORTED FORM THE SUBJECT MENTIONED LANDS, HENCE, NO CONSIDERATION OF THESE VITAL ASPECTS WOULD MAKE THE ORDER OF THE LD. AO ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. WITH THESE OBSERVATIONS, THE LD. CIT PASSED ORDER U/S.263 OF THE ITA NO S . 2629/MUM/12 & ITA NO.236/MUM/2014 M/S KUTCH DEVELOPMENT ORGANISATION HOPE - 1000 10 ACT, DATED 31.01.2012 SETTING ASIDE THE ORDER O F LD. AO WITH THE DIRECTION TO TREAT THE SALE PROCEEDS OF LAND AT PANVEL AS BUSINESS INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 11. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAP ER BOOK FILED BY THE ASSESSEE. IT IS NOT IN DISPUTE THAT THE LANDS PURCHASED AT PANVEL WERE AGRICULTURAL LANDS AS PER THE REVENUE RECORDS. WE FIND THAT THE ASSESSEE HAD EXPLAINED WITH COGENT REASONS AS TO WHY THE AGRICULTURAL OPERATIONS COULD NOT BE CARRIE D OUT BY IT ON THE SUBJECT MENTIONED LANDS IN VIEW OF THE ENCROACHMENTS BY CERTAIN VILLAGERS. WE FIND THAT THE ASSESSEE HAD ALSO EXPLAINED THAT CERTAIN VILLAGERS WERE ACTUALLY TILLING THE LANDS BELONGING TO THE ASSESSEE FOR AGRICULTURAL PURPOSES AND THE AG RICULTURAL INCOME DERIVED THEREON WERE TAKEN AWAY AND ENJOYED BY THOSE VILLAGERS. THESE FACTS WERE NOT CONTROVERTED BY THE LD. DR BEFORE US, HENCE, ONE OF THE CONTENTIONS OF LD. CIT THAT NO AGRICULTURAL OPERATIONS WAS CARRIED OUT BY THE ASSESSEE AND NO AG RICULTURAL INCOME WAS REPORTED BY THE ASSESSEE FOR TREATING THE LANDS AS NON - AGRICULTURAL LAND , CANNOT BE ACCEPTED. 12. THE LD. AR ALSO ARGUED THAT WITHOUT PREJUDICE TO HIS ORIGINAL ARGUMENTS THAT THE SUBJECT MENTIONED LAND IS AGRICULTURE LAND AND THE GAI NS DERIVED THEREON WOULD HAVE TO BE TAXED ONLY UNDER THE HEAD CAPITAL GAINS, ALSO ARGUED THAT THE PROVISIONS OF SECTION 50C OF THE ACT CANNOT BE MADE APPLICABLE TO BUSINESS ASSET. HENCE, REPLACING THE SALE CONSIDERATION VALUE AT RS.52,98,075/ - BEING THE ST AMP DUTY VALUE AS PER SECTION 50C OF THE ACT CANNOT BE DONE IN THE INSTANT CASE. WE ARE IN ITA NO S . 2629/MUM/12 & ITA NO.236/MUM/2014 M/S KUTCH DEVELOPMENT ORGANISATION HOPE - 1000 11 COMPLETE AGREEMENT WITH THIS ALTERNATIVE ARGUMENT OF LD. AR AND HELD THAT PROVISIONS OF SECTION 50C CANNOT BE MADE APPLICABLE TO BUSINESS ASSET. RELIANCE IN THIS REG ARD IS PLACED ON THE DECISION OF HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. THIRUVENGADAM INVESTMENTS (P.) LTD., (2010) 320 ITR 345 (MADRAS) . 13. WE ALSO FIND THAT THE SUBJECT MENTIONED LAND AT PANVEL IS SITUATED BEYOND 8 KMS. FROM THE MUNICIPAL LIMI TS, WHICH FACT IS NOT DISPUTED BY THE LD.CIT. HENCE, EVEN IF THE SALE OF AGRICULTURE LAND IS TO BE SUBJECTED TO TAX UNDER THE HEAD CAPITAL GAINS, WE FIND THAT THE SUBJECT MENTIONED LAND IS EXEMPT U/S.2(14) OF THE ACT. HENCE, THE SALE OF AGRICULTURAL LAND I N THE INSTANT CASE AT PANVEL, CANNOT BE TAXED EVEN UNDER THE HEAD CAPITAL GAINS, AS IT IS NOT A CAPITAL ASSET U/S.2(14) OF THE ACT. 14. WE FIND THE PURCHASE OF AGRICULTURE LAND AT PANVEL BEING MADE FOR SANATORIUM PURPOSE AS ENUMERATED IN THE FACTS ABOVE, WHICH ADMITTEDLY AN INDEPENDENT ACTIVITY OTHER THAN THE REGULAR OBJECTS ENUMERATED IN THE OBJECTS OF THE ASSOCIATION AS BUSINESS OF REAL ESTATE, BUILDERS AND DEVELOPERS ETC. 15. IN ANY CASE, WE HOLD THAT WHETHER THE AGRICULTURE LAND IS HELD AS CAPITAL ASSE T OR AS BUSINESS ASSET, IT DOES NOT ALTER THE CHARACTER OF THE ASSET. 16. WE ALSO FIND THAT THE LD. AO HAS MADE ELABORATE ENQUIRY ON THE SUBJECTED MENTIONED ISSUE OF SALE OF AGRICULTURAL LAND AT PANVEL AND HAD CATEGORICALLY MENTIONED IN THE ASSESSMENT ORDE R BY NOT FOLLOWING THE LONG TERM CAPITAL LOSS ON SALE THEREON IN THE SUM OF RS.8,31,799/ - TO ITA NO S . 2629/MUM/12 & ITA NO.236/MUM/2014 M/S KUTCH DEVELOPMENT ORGANISATION HOPE - 1000 12 SUBSEQUENT YEARS. THIS GOES TO PROVE THAT THE LD. AO HAS FULLY APPLIED HIS MIND ON THE SUBJECT MENTIONED ISSUE AND THE LD. CIT IS ONLY TRYING TO SUBSTITUTE HIS OWN OPINION IN THE PLACE OF OPINION ALREADY FRAMED BY THE LD. AO. IN OUR CONSIDERED OPINION, THE SAME CANNOT BE DONE UNDER REVISION PROCEEDINGS U/S.263 OF THE ACT. THERE IS NO INCORRECT ASSUMPTION OF FACTS OR INCORRECT OPINION OF LAW ON THE PART OF THE LD. AO . WE FIND THAT THE LD. CIT DID NOT HAVE ANY FRESH MATERIAL THAT HAS COME TO HIS KNOWLEDGE TO TAKE A DIFFERENT VIEW CONTRARY TO THE VIEW ALREADY TAKEN BY THE LD. AO ON THE ISSUE. THIS IS A CLEAR CASE OF LD.CIT NEGATING FROM THE SAME DOCUMENTS THAT ARE ALREA DY AVAILABLE ON RECORD AND IT IS A DIFFERENT CONCLUSION, WHICH AMOUNTS TO SUBSTITUTION OF HIS OPINION. 17. WE ALSO FIND FROM THE PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE THAT THE ASSESSEE MAIN OBJECT OF ENGAGING IN BUSINESS OF REAL ESTATE, DEVELOPERS I S BEING CARRIED ON AS IS EVIDENT FROM THE FIGURES REFLECTED IN WORK - IN - PROGRESS IN RESPECT OF DOMBIVLI PROJECT IN THE BALANCE SHEET OF THE ASSESSEE. IN ANY CASE, THE OBJECT CLAUSE OF THE ASSOCIATION IS NOT DETERMINATIVE OF THE ACTIVITY CARRIED ON BY THE ASSESSEE. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF FORT PROPERTEIS (P.) LTD. VS. CIT, 208 ITR 232. 18. IN VIEW OF THE AFORESAID OB SERVATIONS AND BY PLACING RELIANCE ON THE VARIOUS JUDICIAL PRECED ENTS , CITED HEREINABOVE, WE HOLD THAT THE LD. CIT HAS ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT, IN THE INSTANT CASE OF THE ASSESSEE AND WE HEREBY QUASH THE PROCEEDINGS ITA NO S . 2629/MUM/12 & ITA NO.236/MUM/2014 M/S KUTCH DEVELOPMENT ORGANISATION HOPE - 1000 13 INITIATED BY THE LD. CIT U/S.263 OF THE ACT. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE IN ITA NO. 2626/MUM/2012 ARE ALLOWED. 19. THE APPEAL IN ITA NO.236/MUM/2014 IS ALSO TO BE ALLOWED AS THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE CONSEQUENTIAL ORDER PASSED BY THE LD. AO PURSUANT TO THE ORDER PASSED BY THE LD. CIT U/S.263 OF THE ACT AND, ACCORDINGLY, WE ALLOW THE GROUNDS RAISED BY THE ASSESSEE IN THE PRESENT APPEAL. 20 . IN THE RESULT, BOTH APPEALS OF THE ASSESSEE I.E. ITA NO.2629/MUM/2012 AND ITA NO.236/MUM/2014 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 / 05 /201 9 SD/ - ( RAM LAL NEGI ) SD / - ( M.BALAGANESH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 29 / 05 /201 9 PRAKASH KUMAR MISHRA, SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPO NDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//