M/s Rupinder Singh Gill, Ludhiana V. ACIT, Khanna

ITA 298/CHANDI/2013

• Counselvise Citation: 29821514 RSA 2013
• Duration Of Justice: 2 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 18-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Capital asset; Business income
• Section: 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT & MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 298/CHD/2013 ASSESSMENT YEAR: 2009-10 SH. RUPINDER SINGH GILL, VS. THE ACIT, CIRCLE, PROP. M/S KARAM SINGH GILL & SONS, CIRCLE, KHANNA LUDHIANA PAN NO. ABZPG5376M (APPELLANT) (RESPONDENT) APPELLANT BY : SH. PARIKSHIT AGGARWAL RESPONDENT BY : SH. S.K. MITTAL DATE OF HEARING : 16.09.2015 DATE OF PRONOUNCEMENT : 16.10.2015 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-II. LUDHIANA DATED 8.1.2013 RELATING TO ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS FILED MODIFIED GROUND OF APPEAL WHICH READS AS UNDER:- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE ACTION O F LD. ASSESSING OFFICER TO ASSESS THE SUBJECT GAINS ARISI NG FROM SALE OF LAND AS BUSINESS INCOME AND NOT AS CAPITAL GAINS IGNORING 2 CRUCIAL FACTS AND SUBMISSIONS AND ON BASIS OF IRREV ERENT AND EXTRANEOUS FACTORS. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE FILED HIS RETURN OF INCOME ON 30.9.2009 DECLARING TOTAL INCOME AT RS. 5 ,98,710/- PLUS AGRICULTURAL INCOME OF RS. 8,17,000/-. THE SAID RETURN WAS PROCE SSED U/S 143(1). SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AS SESSMENT UNDER CASS. AS PER RETURN OF INCOME THE ASSESSEE HAS SHOWN CAPITAL GAI NS FROM SALES OF PROPERTY AGAINST WHICH DEDUCTION U/S 54F OF THE INCOME-TAX A CT, 1961 (IN SHORT 'THE ACT') WAS CLAIMED AMOUNTING TO RS. 51,12,860/- BEING THE AMOUNT INVESTED IN THE CONSTRUCTION OF RESIDENTIAL HOUSE. THE ASSESSEE HAD PURCHASED AN AGRICULTURAL LAND MEASURING 20 KANALS 1 MARLA ON 7.6.1998 WITH CLEAR INTENTION FOR AGRICULTURAL PURPOSE AND ASSESSEE SOLD 11 KANAL 19 MARLA IN THIS YEAR I.E. AFTER A GAP OF 20 YEARS AND ASSESSEE USED AGRICULTURAL LAND FOR AGRIC ULTURAL PURPOSE THROUGHOUT THE PERIOD OF HOLDING AND SHOWN AGRICULTURAL INCOME IN HIS INCOME TAX RETURNS. ON REMAINING LAND MEASURING 8 KANAL 2 MARLA, THE ASSES SEE CONSTRUCTED RESIDENTIAL HOUSE AND ALL THE SALE PROCEEDS OF SOLD LAND HAD BE EN INVESTED ON CONSTRUCTION OF RESIDENTIAL HOUSE. FIRSTLY, THE SALE PROCEEDS WERE DEPOSITED IN INDUSIND BANK AND CONSTRUCTION EXPENSES ON RESIDENTIAL HOUSE WERE MAD E FROM WITHDRAWALS FROM THE SAID BANK. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSEE SUBMITTED THE DETAILS OF EXPENSES ALONG WITH SOME PURCHASE BI LLS / VOUCHERS. THE LAND WAS SOLD DURING THE YEAR TO FIVE DIFFERENT PERSONS IN T HE FORM OF RESIDENTIAL PLOTS. THE DETAILS OF LAND SOLD DURING THE YEAR ARE AS UNDER:- SR.NO. DATE OF SALE LAND MEASURING PLOT NO. AREA AMOUNT 1. 08.05.2008 OIK- 1-2/3 MARLA 23 650 SQ. YARDS 11,70,000/- 2. 08.09.2008 01K-3-1/2 MARLA 27 706.95 SQ. YARDS 12,72,000/- 3 3. 11.12.2008 01K-2-1/3 MARLA 31 671 SQ. YARDS 10,07,000/- 4 20.02.2009 OOK-17-1/3 MARLA 29 519 SQ. YARDS 9,35,000/- 5 16.03.2009 OOK- 16-2/5 MARIA 54 492.55 SQ. YARDS 7,00,000/- TOTAL 50,84,000/- ON PERUSAL OF SALE DEED OF THE ABOVE PLOTS, THE ASS ESSING OFFICER NOTICED THE FOLLOWING FEATURES IN THE SAME. I) ALL THE PLOTS SOLD HAD DISTINCT PLOT NUMBERS. II) THE PLOTS SOLD WERE SITUATED IN NEW KHANNA CIT Y COLONY. III) THE NEW KHANNA CITY COLONY IS APPROVED BY PUDA . IV) AT PAGE NO.4 OF THE REGISTRATION DEED, IT WAS SPECIFICALLY MENTIONED THAT FACILITIES OF STREET LIGHT, WATER SU PPLY, SEWERAGE, PARK, ROAD ETC. WERE AVAILABLE IN THIS CO LONY. V) AT PAGE NO. 1 OF THE REGISTRATION DEED, THE DIME NSION OF THE PLOT AND SO THE DIMENSION OF THE SURROUNDING PLOTS WERE MENTIONED. VI) IT WAS ALSO MENTIONED IN THE REGISTRATION DEE D THAT THE PLOT IS SITUATED IN BLOCK-5/D OF THE NEW KHANNA CITY COLONY . 4. THE ASSESSING OFFICER TOOK THE VIEW THAT THE ABO VE TRANSACTIONS OF SALE OF PLOTS BY THE ASSESSEE WERE AN ADVENTURE IN THE NATU RE OF TRADE. THE ASSESSING OFFICER CONDUCTED INQUIRY BY HIS DY. INSPECTOR. THE INSPECTOR MADE INQUIRIES FROM TWO OF THE BUYERS OF THE PLOTS NAMELY SMT. SHA VETA JAIN AND PRINKYA SINGHI. THE SAID REPORT REVEALED THAT WHEN THE LAND WAS SOL D BY THE ASSESSEE IN THE FORM OF PLOTS, NO CULTIVATION WAS DONE ON IT. FURTHER, W HEN THE LAND WAS SOLD BY THE ASSESSEE, THE FACILITIES LIKE STREET LIGHT, WATER S UPPLY, SEWERAGE, PARK, ROAD ETC. WERE AVAILABLE IN THE NEW KHANNA CITY COLONY. IN T HE INSPECTORS REPORT, IT WAS ALSO MENTIONED THAT SURROUNDING AREA HAS ALREADY BE EN DEVELOPED AS RESIDENTIAL AREA AND 10 TO 12 HOUSES WERE UNDER CONSTRUCTION W HEN THE PLOTS WERE SOLD BY 4 THE ASSESSEE. ON THE BASIS OF THE REPOT OF THE INSP ECTOR, THE ASSESSING OFFICER OPINED THAT ASSESSEE HAD SOLD THE ABOVE SAID FIVE P LOTS BY DEVELOPING THE LAND IN QUESTION. THE ASSESSING OFFICER FURTHER HELD THAT T HE MOMENT THE LAND IS DEVELOPED AND THE FACILITIES SUCH AS STREET LIGHT, WATER SUPPLY, SEWERAGE, ROAD, PARK ETC. WERE PROVIDED THE LAND IN QUESTION NO LON GER REMAINED INVESTMENT BUT BECOMES PART OF THE STOCK-IN-TRADE. THE ASSESSING O FFICER CONCLUDED THAT NO CAPITAL GAIN IS ARISING TO THE ASSESSEE ON SALE OF THE PLOTS AMOUNTING TO RS. 50.84,000/-. THE ASSESSING OFFICER ASSESSED THESE R ECEIPTS UNDER THE HEAD BUSINESS INCOME. THE ASSESSING OFFICER FURTHER HE LD THAT ASSESSEE WAS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S 54F. THE ASSESS EE CLAIMED THE BENEFIT OF INDEXATION AMOUNTING TO RS. 77,568/- WHICH WAS ALSO DISALLOWED BY THE ASSESSING OFFICER. 5. ON APPEAL, THE CIT(A) UPHELD THE ORDER OF THE AS SESSING OFFICER OBSERVING THAT PLOTS SOLD BY THE ASSESSEE IS A DEVELOPED PROP ERTY SITUATED IN THE NEW KHANNA CITY COLONY WHICH IS APPROVED BY THE PUDA. H E ALSO OBSERVED THAT IT WAS NOT THE CASE OF THE ASSESSEE THAT THE PLOTS SOL D BY HIM ARE AGRICULTURAL LAND WITHIN THE MEANING OF SECTION 2(14)(III) OF THE ACT . HE FURTHER OBSERVED THAT THE VERY FACT THAT THE PLOTS SOLD WERE OF THE SIZE OF A BOUT 500 SQUARE YARDS EACH AND THE SALE DEED MENTIONED THE PLOTS NUMBERS, BLOCK NU MBERS AS WELL AS AVAILABILITY OF FACILITIES LIKE, SEWERAGE, ROADS, PARKS, STREET LIGHT ETC., CLEARLY SHOW THAT THE LAND (PLOTS) WERE NOT SOLD FOR AGRICULTURAL USE BUT FOR RESIDENTIAL USE. CONSEQUENTLY, THE CIT(A) DISMISSED THE APPEAL OF TH E ASSESSEE AND, HENCE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. SHRI PRAKSH IT AGGARWAL, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BE FORE THE LOWER AUTHORITIES. HE ALSO RELIED ON THE FOLLOWING JUDGMENTS:- 5 1. CIT VS SK KAINTAL (231 CTR 531) (2009) (P&H HC) 2. KAUR SINGH VS. CIT (144 ITR 756) (1983) (P&H) 3. CIT VS SUSHILA DEVI JAIN (259 ITR 671) (2003) (P&H) 4. CIT VS SH. HARJIT SINGH SANGHA (ITA NO. 16 OF 2012) (P&H) 5. CIT VS SOHAN KHAN (304 ITR 194) (2008) (RAJ. HC) 6. CIT VS. SURESH CHAND GOYAL ( 298 ITR 277)(2008)(MP HC) 7. JANKI RAM BAHADUR VS CIT (57 ITR 21) (1965) (SC) 8 CIT VS PAI PROVISION STORES (203 TAXMAN 196) (20110 (KAR. HC) 9. ITO VS ASHOK KUMAR (ITA NO. 1046 & 1314 OF 2012) (DEL. TRIB.) 7. THE LD. DR SUPPORTED THE ORDER OF LOWER AUTHORIT IES. THERE IS NO DISPUTE THAT ASSESSEE HAD PURCHASED TOTAL LAND MEASURING 2 2 KANAL 1 MARLA ON 7.6.1988 WITH CLEAR INTENTION FOR AGRICULTURAL PURPOSE AND A SSESSEE SOLD PART OF SUCH LAND CONVERTING INTO AS MANY AS FIVE PLOTS. THESE FIVE P LOTS WERE ADMITTEDLY SOLD IN THIS YEAR. THUS, IT IS CLEAR THAT AFTER A GAP OF 2 0 YEARS, THE ASSESSEE HAD SOLD PART OF HIS AGRICULTURAL LAND. THE REVENUE HAS NOT DISPU TED THAT THE ASSESSEE USED AGRICULTURAL LAND FOR AGRICULTURAL PURPOSES THROUGH OUT THE PERIOD OF HOLDING AND SHOWN AGRICULTURAL INCOME IN HIS INCOME TAX RETURNS . AS PER THE ASSESSMENT ORDER FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN AGRICULTURAL INCOME FOR RATE PURPOSES AMOUNTING TO RS. 8,55,000/-. THE HOL DING OF AGRICULTURAL LAND FOR THAT A LONG PERIOD PROVES THE FACT THAT THE ASSESSE E HOLD THE AGRICULTURAL LAND PURCHASED BY HIM FOR AGRICULTURAL PURPOSE. IT IS AL SO AN ADMITTED FACT THAT ON REMAINING LAND MEASURING 8 KANAL 2 MARLAS, THE ASSE SSEE HAS CONSTRUCTED RESIDENTIAL HOUSE AND ALL SALE PROCEEDS OF SOLD LAN D HAVE BEEN INVESTED IN CONSTRUCTION OF RESIDENTIAL HOUSE. THE CASE OF REVE NUE IS THAT THE SALE OF LAND (PLOTS) WAS AN ADVENTURE IN THE NATURE OF TRADE. T HE REASONS GIVEN BY THE 6 ASSESSING OFFICER HOLDING THAT THE TRANSACTIONS WER E OF ADVENTURE IN NATURE OF TRADE ARE NOT TENABLE. IT APPEARS THAT REVENUE AUTH ORITIES BELOW WERE INFLUENCED BY THE FACT THAT FIVE PLOTS OF 500 SQUARE YARDS EAC H HAVE BEEN SOLD AND FURTHER WHEN THE LAND WAS SOLD BY THE ASSESSEE IN THE FORM OF PLOTS, NO CULTIVATION WAS BEING DONE ON IT. IT IS ALSO ONE OF THE CONTENTIONS OF THE AUTHORITIES BELOW THAT WHEN THE LAND WAS SOLD BY THE ASSESSEE, THE FACILIT IES LIKE STREET LIGHT, WATER SUPPLY, SEWERAGE ETC. WERE AVAILABLE IN THE NEW KHA NNA CITY COLONY. IN OUR CONSIDERED VIEW, IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN HOLDING THA T INCOME DERIVED BY THE ASSESSEE FROM SALE OF PLOTS WAS FROM AN ADVENTURE I N THE NATURE OF TRADE. WHILE TAKING SUCH A VIEW WE ARE FORTIFIED BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF KAUR SINGH V CIT (SUPRA) WHEREIN THE HON'BLE JURISDICTIONAL HIGH COURT ON SIMILAR SET OF FACTS HAS HELD AS UNDER:- 11. KEEPING IN VIEW THE PRINCIPLES ENUNCIATED BY T HE SUPREME COURT, WE SHALL NOW INDEPENDENTLY EXAMINE WHETHER O N THE FACTS FOUND BY THE TRIBUNAL, THE SALE WAS AN ADVENT URE IN THE NATURE OF TRADE. A BARE ANALYSIS OF THE FACTS FOUND BY THE TRIBUNAL WOULD SHOW THAT FOR ARRIVING AT THIS CONCL USION THAT IT WAS AN ADVENTURE IN THE NATURE OF TRADE, THE TRIBUN AL WAS MAINLY INFLUENCED BY THE FACT THAT OUT OF THE LAND ATTACHED TO THE KRISHAN BAGH KOTHI, 42 PLOTS OF 2000 SQ. YARDS EACH HAVE BEEN EARMARKED FOR SALE ; THAT IN THE YEAR IN QUEST ION 7 PLOTS WERE SOLD FOR RS. 18,500 AND THAT ADVANCES WERE REC EIVED IN RESPECT OF OTHER PLOTS. IN OUR VIEW, ON THE BASIS O F THESE FACTS ALONE, NO SUCH INFERENCE COULD LEGALLY BE DRAWN THA T THE TRANSACTION IN DISPUTE HAS THE CHARACTER OF A TRADE IN NATURE. THE ASSESSEE ADMITTEDLY HAD PURCHASED THE PROPERTY IN THE YEAR 1967. THE REVENUE HAS NOT AT ALL BROUGHT ANY CIRCUMSTANCE OR EVIDENCE ON THE, RECORD TO SHOW THA T AT THE TIME OF THE PURCHASE OF _THE PROPERTY IN THE YEAR 1967, THE ASSESSEE HAD AN INTENTION TO SELL THE PROPERTY. MER ELY CARVING OUT PLOTS IN A PORTION OF THE LAND, WITHOUT PROOF OF ANYTHING MORE, CANNOT GIVE RISE TO THE CONCLUSION THAT THE T RANSACTION IS 7 AN ADVENTURE IN THE NATURE OF TRADE. OUR ATTENTION WAS POINTEDLY DRAWN BY THE LD. COUNSEL FOR THE REVENUE TO A DIVISION BENCH JUDGMENT OF THIS COURT IN HARBALLNS SINGH VS. CIT (1981)23 CTR (P & H) 335 : (1981)132 ITR 77 (P & H). BUT THE DECISION IS OF NO ASSISTANCE TO THE REVENUE AS THE FACTS OF THAT CASE ARE ENTIRELY DIFFERENT AND ON THE FACT S FOUND IN THAT CASE, THE VIEW WAS RIGHTLY TAKEN THAT IT WAS A N ADVENTURE IN THE NATURE OF TRADE. THERE CAN BE NO GAINSAYING THAT EVEN A SINGLE VENTURE MAY BE REGARDED AS A TRADE OR BUSINE SS, BUT THERE HAVE TO BE CIRCUMSTANCES WHICH MAY GIVE RISE TO SUCH A CONCLUSION. AS EARLIER OBSERVED, IN THIS CASE THE T RIBUNAL HAS FALLEN IN ERROR IN HOLDING THE VENTURE AS A TRADE O R BUSINESS MERELY ON THE GROUND THAT 42 PLOTS WERE CARVED OUT, OF WHICH 7 WERE DISPOSED OF IN THE YEAR IN QUESTION. IN THIS V IEW OF THE MATTER, IN THE CIRCUMSTANCES OF THE CASE AND ON THE FACTS F OUND, THE TRIBUNAL WAS NOT RIGHT IN LAW IN HOLDING THAT T HE INCOME DERIVED BY THE ASSESSEE FROM THE SALE OF PLOTS WERE FROM AN ADVENTURE IN THE NATURE OF TRADE. CONSEQUENTLY, TH E ANSWER TO THIS QUESTION IS RETURNED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 8. IN THE INSTANT CASE ALSO THE REVENUE HAS NOT AT ALL BROUGHT ON RECORD ANY CIRCUMSTANCE OR EVIDENCE TO SHOW THAT AT THE TIME O F PURCHASE OF THE PROPERTY IN THE YEAR 1988, THE ASSESSEE HAD INTENTION TO SELL T HE PROPERTY. THE HON'BLE JURISDICTIONAL HIGH COURT HELD THAT CONVERTING AGRI CULTURAL LAND INTO THE PLOTS AND SELLING THEM CANNOT BE TREATED AS ADVENTURE IN NATU RE OF TRADE WHEN IT COULD BE ESTABLISHED THAT ASSESSEE HAD NO INTENTION TO SELL THE LAND AT THE TIME WHEN IT WAS PURCHASED. IN OUR OPINION, THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF KAUR SINGH V CIT (SUPRA) IS SQUARELY A PPLICABLE TO THE FACTS OF THE PRESENT CASE. 9. THE CONTENTION OF THE ASSESSEE WAS THAT THE ASSE SSEE HAS SOLD PART OF THE LAND AFTER HOLDING IT FOR A PERIOD OF 20 YEARS AND UTILIZING IT FOR AGRICULTURAL 8 PURPOSES DURING THE SAID PERIOD WITHOUT EFFECTING A NY KIND OF IMPROVEMENT ON THE LAND, THEREFORE, EARNING OF SALE OF LAND HAS TO BE TREATED AS CAPITAL GAIN AND NOT PROFIT AND GAINS OF BUSINESS AND PROFESSION. IN SU PPORT OF THE ABOVE CONTENTION THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE JUDG MENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V S. K. KAINTAL (SUPRA) WHEREIN THE HON'BLE HIGH COURT HAS HELD (HEAD NOTE) AS UNDER:- THE LAND UNDER REFERENCE WAS PURCHASED BY THE ASSESSEE ON 9TH FEB., 1983. THE SALE TRANSACTIONS WERE EVENTUAL LY MADE BY THE ASSESSEE ON 18TH JUNE, 2003 AND 16TH FEB., 2004 I.E., AFTER A PERIOD OF TWO DECADES. SECONDLY, FOR THE PERIOD O F TWO DECADES INTERVENING THE SALE OF AGRICULTURAL LAND, THE ASSESSEE CONTINUED TO USE THE LAND IN QUESTION FOR AGRICULTU RAL PURPOSES, AND AS SUCH, CONTINUED TO DERIVE INCOME T HEREFROM THROUGH THE SALE OF AGRICULTURAL PRODUCE. EVEN FOR THE ASSESSMENT YEAR UNDER REFERENCE THE ASSESSEE DECLARED HIS AGRICULTURAL INCOME AT RS. 2,34,000. THIRDLY, THERE IS NO MATERIAL ON THE RECORD OF THIS CASE TO SUGGEST THAT THE ASSESSEE EFFECTED ANY KIND OF IMPROVEMENT IN THE LAND, SO AS TO BE ABLE TO SELL THE SAME AT HIGHER PRICE. IT IS NOT POSSIBL E TO ACCEPT THE CONTENTION OF THE COUNSEL FOR THE REVENUE SO AS TO TREAT THE SALE OF AGRICULTURAL LAND AT THE HANDS OF THE ASSES SEE AS FALLING UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION'. THEREFORE, THE EARNING OF THE ASSESSEE FROM SALE TRANSACTION OF AGRICULTURAL LAND IS LIABLE TO BE TREATED AS A 'CAP ITAL GAIN. 10. IN THE AFORESAID CASE, THE ASSESSEE SOLD THE AG RICULTURAL LAND AFTER HOLDING IT FOR A PERIOD OF TWO DECADES. DURING THIS PERIOD OF TWO DECADES THE ASSESSEE CONTINUED TO USE THE SAID LAND FOR AGRICULTURAL PU RPOSES. EVEN FOR THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAD DECLARED AGRICULT URAL INCOME OF RS. 2,34,000/-. THERE WAS NO EVIDENCE ON RECORD TO SUGGEST THAT ASS ESSEE EFFECTED ANY KIND OF IMPROVEMENT ON THE LAND SO AS TO SELL IT AT A HIGHE R PRICE. THE HON'BLE JURISDICTION HIGH COURT HELD THAT EARNING FROM SAL E OF LAND IS TO BE TREATED AS 9 CAPITAL GAIN AND NOT PROFIT AND GAINS OF BUSINESS O R PROFESSION. THE FACTS OF THE PRESENT CASE ARE ALMOST SIMILAR TO THAT OF THE CASE OF CIT V S.K. KAINTAL, REFERRED TO ABOVE. APPLYING THE DECISION OF HON'BLE JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT V S.K. KAINTAL (SUPRA) TO THE FACTS OF THE P RESENT CASE, WE HAVE NO HESITATION TO HOLD THAT THE EARNING FROM SALE OF LA ND IN QUESTION SHOULD BE TREATED AS A CAPITAL GAIN AND NOT PROFIT AND GAINS OF BUSI NESS OR PROFESSION. 11. WE MAY ALSO REFER TO THE DECISION OF THE HON'BL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V SUSHILA DEVI JAIN (SUPRA), WHE REIN THE HON'BLE JURISDICTIONAL HIIGH COURT HELD THAT LAND INHERITED BY ASSESSEE SOLD IN PARCELS BECAUSE THE HUGE AREA COULD NOT BE SOLD IN ONE GO DID NOT CONST ITUTE AN ADVENTURE IN THE NATURE OF TRADE. AT THIS STAGE, IT WOULD ALSO BE W ORTHWHILE TO REFER TO THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHRI HARJIT SINGH SANGHA (SUPRA) WHEREIN THE HON'BLE JURISDICTIONAL HIGH COURT HAS HELD AS UNDER:- 6. THE TRIBUNAL ALSO ON APPRECIATION OF MATERIAL O N RECORD CAME TO THE CONCLUSION THAT IT WAS NOT BUSINESS INC OME BUT IT RESULTED IN LONG TERM CAPITAL GAINS. THE RELEVANT F INDINGS NOTICED READ THUS:- 21. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CI RCUMSTANCES AND THE EVIDENCE PERUSED BY US, THE NATURE OF LAND BEING AGRICULTURAL LAND STANDS ESTABLISHED ; A) AS THE SA ID LAND WAS PART OF NOTIFIED FOREST AREA WHERE ADMITTEDLY NO OT HER ACTIVITIES ITA NO.16 OF 2012 4 EXCEPT AGRICULTURAL, IF ALLOWED, COULD BE CARRIED OUT; B) GIRDAWARI OF THE LANDHOLDI NGS OF THE ASSESSEE PROVES THE STAND OF THE ASSESSEE THAT IT W AS AGRICULTURAL LAND AND ALSO THE NOTIFICATION ISSUED FOR THE URBAN USAGE/NON-AGRICULTURAL ACTIVITIES CERTIFIES THAT PR IOR TO ITS NOTIFICATION THE SAID LAND WAS USED FOR AGRICULTURA L PURPOSES. THE LAND BEING REGISTERED IN LAND REVENUE RECORDS A S AGRICULTURAL LAND, THEN THERE IS NO BASIS FOR HOLDI NG THE SAID 10 LAND AND AS NOT AGRICULTURAL LAND. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE CHANDIGARH BENCH OF THE TRIB UNAL IN DCIT V. A.P.PAPER MILLS LIMITED (SUPRA). ACCORDINGL Y, WE HOLD THAT THE NATURE OF THE LAND SOLD BY THE ASSESSEE AS ON THE DATE OF ITS SALE WAS AGRICULTURAL LAND, WHICH WAS ACQUIR ED BY THE ASSESSEE IN THE YEAR 1995 AND WAS SOLD DURING THE Y EAR UNDER CONSIDERATION. 22. THE SAID ASSET BEING HELD BY THE ASSESSEE CANNO T BE SAID TO BE A BUSINESS ASSET AND ITS SALE IN SMALL PLOTS OF LAND TO DIFFERENT PURCHASERS IS NOT ADVENTURE IN THE NATURE OF TRADE, IN THE ABSENCE OF THE ASSESSEE HAVING FLOATED THE SAME OR HAVING DEVELOPED ITS LAND FOR THE PURPOSES OTHER THAN AGRI CULTURAL LAND. FURTHER FOR CONVERTING THE USAGE, PRIOR PERMI SSION IS REQUIRED FROM THE AUTHORITIES AND IN THE ABSENCE OF ANY PERMISSION BEING OBTAINED BY THE ASSESSEE FROM PUDA AUTHORITIES IN RESPECT OF THE LAND SOLD, MERELY BEC AUSE THE LAND IS SOLD IN SMALL PLOTS TO PERSONS WHO INTENDED ITS RESIDENTIAL USE, DOES NOT CHANGE THE NATURE OF LAND SOLD IN THE HANDS OF THE ASSESSEE AND ITS TAXABILITY. WE FIND SUPPORT FR OM THE RATIO LAID DOWN BY THE HON'BLE PATNA HIGH COURT IN THE CA SE OF ADDL.CIT V. TARACHAND JAIN, 123 ITR 567 (PAT), WHIC H HAS BEEN REFERRED TO BY THE CHANDIGARH BENCH OF THE TRI BUNAL IN DCIT V. M/S A.P.PAPER MILLS LIMITED (SUPRA). THE RE LEVANT EXTRACT OF THE SAID JUDGMENT IS AS UNDER:- '.....THE LAND MAY LIE NEAR AN URBAN AREA AND THE L AND MAY HAVE FETCHED A GOOD PRICE, MAY HOLD GOOD IN CAS ES OF AGRICULTURAL LAND ALSO. SINCE THE LAND HAS BEEN RECORDED IN THE OFFICIAL RECORDS AS AGRICULTURAL LA ND, IF THE DEPARTMENT WANTED TO SHOW THAT THE ENTRY WAS WR ONG, IT SHOULD HAVE GIVEN ITA NO.16 OF 2012 5 CONCRETE F ACTS IN THAT DIRECTION. FOR EXAMPLE, IT COULD HAVE SHOWN THAT THE LAND LAY WITHIN THE MUNICIPAL LIMITS OF THE TOW N OF RANCHI OR THAT THE ASSESSEE HAD MADE HIS ENTIRE PLO T OF LAND INTO PARCELS AND WAS SELLING EACH ONE OF THEM FOR THE PURPOSE OF CONSTRUCTING A HOUSE THEREOF. THE FA CT THAT THE PURCHASER HAS PURCHASED IT FOR THE PURPOSE OF 11 CONSTRUCTING HIS HOUSE HAS NO RELEVANCE BECAUSE SO FAR AS THE SELLER IS CONCERNED, HE WILL BE DEEMED TO HA VE PARTED WITH THE AGRICULTURAL LAND IN THE FORM OF AGRICULTURAL LAND, UNLESS IT IS PROVED OTHERWISE. THE DEPARTMENT HAS NOT BROUGHT UP ANY SUCH MATERIAL ON THE RECORD BY WHICH IT COULD BE SAID THAT THE CRITERIA ADOPTED BY THE TRIBUNAL FOR DETERMINING THE CHARACT ER OF THE AGRICULTURAL LAND WAS WRONG.' [EMPHASIS SUPPLIE D] 23. IN VIEW THEREOF WE HOLD THAT THE GAIN ARISING O N THE SALE OF THE AFORESAID AGRICULTURAL LAND CANNOT BE T AXED AS INCOME FROM BUSINESS. 7. LEARNED COUNSEL FOR THE REVENUE WAS UNABLE TO SHOW THAT THE ACTIVITY UNDERTAKEN BY THE ASSESSEE WAS AN ADVE NTURE IN THE NATURE OF TRADE. NO ERROR COULD BE POINTED OUT IN T HE FINDINGS RECORDED BY THE CIT(A) AND UPHELD BY THE TRIBUNAL W ARRANTING INTERFERENCE BY THIS COURT. 12. IN THE INSTANT CASE ALSO, THE LAND HAS BEEN REC ORDED IN THE REVENUE RECORDS AS AGRICULTURAL LAND, THERE IS NOTHING ON RECORD TO SHOW THAT THE ENTRY WAS WRONG. IN THE ABOVE DECISION IT HAS BEEN HELD THAT THE FAC T THAT THE PURCHASER HAD PURCHASED THE LAND FOR THE PURPOSE OF CONSTRUCTING HIS HOUSE HAS NO RELEVANCE BECAUSE SO FAR AS THE SELLER IS CONCERNED, HE WILL BE DEEMED TO HAVE PARTED WITH THE AGRICULTURAL LAND IN THE FORM OF AGRICULTURAL L AND, UNLESS IT IS PROVED OTHERWISE. THE HON'BLE RAJASTHAN HIGH COURT IN TH E CASE OF CIT V SOHAN KHAN (SUPRA) HAD MADE A REMARKABLE OBSERVATIONS AND ST ATED THAT IN THE ABSENCE OF ANYTHING TO SHOW THAT ASSESSEE HAD PURCHASED THE LA ND WITH THE INTENTION TO SELL IT AT A PROFIT OR THAT THE ASSESSEE IS A REGULAR DEALE R IN REAL ESTATE, PIECEMEAL SALE OF LAND BY THE ASSESSEE BY EARMARKING PLOTS CONSTITUTE D DISPOSAL OF CAPITAL ASSET AND NOT AN ADVENTURE IN THE NATURE OF TRADE AND THERE FORE, SURPLUS IS TAXABLE AS CAPITAL GAINS. IN SIMILAR CIRCUMSTANCES, THE HON'B LE KARNATKKA HIGH COURT IN THE CASE OF CIT V PAI PROVISION STORES (SUPRA) HELD THA T EVEN THOUGH DEVELOPMENT AND 12 SALE OF PROPERTY WAS ONE OF THE OBJECT OF THE ASSES SEE FIRM, THE ASSESSEE WAS IN FACT NOT CARRYING ON THAT BUSINESS HENCE INCOME FRO M SALE OF PART OF DEVELOPED PROPERTY, WHICH WAS UTILIZED IN CLEARING THE DEBTS INCURRED IN DEVELOPMENT OF PROPERTY WAS CAPITAL GAINS AND NOT BUSINESS INCOME, MORE SO EVEN THE REMAINING PROPERTY WAS USED BY ASSESSEE IN CARRYING OUT ITS BUSINESS AND LETTING OUT TO TENANTS. IN THE INSTANT CASE, THE ASSESSEE SOLD P ART OF THE AGRICULTURAL LAND HOLDING FOR LAST 20 YEARS AND ENTIRE SALE PROCEEDS WERE INVESTED IN CONSTRUCTING THE RESIDENTIAL HOUSE, WHICH CLEARLY SUGGEST THAT A SSESSEE IS NOT IN THE BUSINESS OF SALE / PURCHASE OF IMMOVABLE PROPERTY AND, THEREFOR E, THE STAND TAKEN BY THE AUTHORITIES BELOW ARE NOT SUSTAINABLE. 13. IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE T HE ORDERS OF THE LOWER AUTHORITIES AND ALLOW THE APPEAL OF THE ASSESSEE. 14. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.10.2015 SD/- SD/- (ANNAPURNA MEHROTRA) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 16 TH OCTOBER, 2015 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR FIT FOR PUBLICATION SD/- SD/- (ANNAPURNA MEHROTRA) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT 13